The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (draft)

The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 will become law on 10 July 2002. The Regulations are supposed to transpose the European Union Directive on Fixed Term Work (1999/ 70/EC) and make additional provisions in UK law in relation to pay and pensions. This is a welcome development as the Government's first draft of the regulations excluded pay and pensions.

This second government consultation on the regulations is due to conclude on 15 April 2002 and the regulations have to be in force by 10 July 2002 to comply with EU law. 
The regulations apply to 'employees' as defined in the Employment Rights Act 1996 only, bucking the trend in recent legislation which has extended rights to the wider category of 'workers', for example the minimum wage, the working time and part-time workers regulations. Arguably, the failure to extend rights to fixed term workers improperly implements the Fixed Work Directive. The Directive refers to an 'employment relationship' as well as 'employment contract'. These words should give both the Directive and national legislation broad coverage.

While the TUC, trade unions and others will continue to make submissions that the regulations should be given wide coverage to include workers, the regulations are in sufficiently final form for LELR to produce this guide to the draft regulations.

The Regulations will prohibit employers from discriminating against fixed term employees. They also try to prevent abuse arising from the successive use of fixed term contracts and improve access to permanent jobs for fixed term employees. The Government estimates that up to 120,000 employees will benefit from the regulations.

The regulations will amend the Employment Rights Act 1996. The redundancy waiver clause will be abolished so that employees will no longer be able to sign away their right to a redundancy payment. As soon as the Regulations are in force on 10 July 2002, no waiver clause or any extension or renewal of the contract made after that date will be effective to waive the right to a redundancy payment.

The Regulations will also introduce a new concept of a 'task contract' into the ERA 1996. Where a contract automatically terminates on the completion of a particular task or on a particular event, the termination will be regarded in law as a dismissal, entitling the dismissed employee access to the usual unfair dismissal etc provisions.

Draft Regulation 2 defines who is the comparator for the purposes of the regulations. A Fixed Term Contract (FTC) employee is only able to compare themselves with a comparable employee employed by the same employer. The Regulations do not allow for a hypothetical comparator as permitted by the sex and race discrimination legislation. The comparator has not only to be employed by the same employer but also to be 'engaged in the same or broadly similar work having regard, where relevant, to whether they have a similar level of qualifications skills and experience'. The comparator should also be based at the same establishment unless there is no one who meets those requirements in which case the comparator can be employed elsewhere, although still needs to work for the same employer.

Regulation 3 establishes the principle that a FTC employee has the right not to be treated by their employer less favourably than the employer treats a comparable permanent employee in relation to contractual terms nor subjected to any detriment. The right only applies if the treatment is on the ground that the employee is a fixed term employee and the treatment is not justified on objective grounds. The Regulations also give rights to FTC employees to have the opportunity to receive training and be informed by the employer of available permanent vacancies.

The ability of employers to justify their treatment raises issues common in the field of indirect discrimination and disability discrimination. Regulation 4 gives details of how objective justification will work in the context of these Regulations. A novel approach is taken whereby 'the treatment in question shall be taken to be justified on objective grounds for the purpose of regulation 3(3) if the terms of the fixed term employee's contract of employment, taken as a whole, are at least as favourable as the terms of the comparable permanent employee's contract of employment'. So if, for example, a FTC gets paid more but gets less holiday and no access to the company's pension scheme it is open to the Tribunal to find that the terms balance out and the disparity is justified. This will be a tricky exercise for Tribunals to embark on and a quite different one to the principles established in equal pay cases.

Another new right is that if an employee considers that they may have been treated in a manner which contravenes the Regulations their employer must give a written statement giving particulars of the reasons for the treatment if the employee makes a written request for the information (draft regulation 5). It is proposed that the time limit for the employer to respond is 21 days seven days longer than is allowed to employers to give a statement of reasons for dismissal under section 92 of the ERA 1996. The statement can be used in subsequent proceedings.

Being dismissed for bringing proceedings under the regulations, exercising rights under the regulations or alleging that an employer has infringed the regulations or for refusing to forego rights under the regulations amounts to an unfair dismissal. Employees also have the right not to be subjected to any detriment on the same grounds (regulation 6). The time limit for bringing a complaint to an Employment Tribunal is the usual three month period from the act complained of with the possibility of a just and equitable extension (regulation 7).

The regulations introduce provisions to prevent the abuse of the use of successive fixed term contracts. The limit will be a maximum of four years, unless their use for a longer period is objectively justified. The statutory limit can be displaced by collective or workplace agreements which, in order to prevent abuse, specify a maximum duration of successive fixed term contracts, a maximum number of contracts and/or objective reasons justifying renewals of fixed term contracts. Agreements may provide for contracts to be renewed in excess of the limit where it is objectively justified to do so (regulation 8). If a fixed term contract is renewed in breach of the limitation, the term of the contract limiting it to a fixed term will become invalid. The contract will be regarded as a permanent one. Successive fixed term contracts will be affected by this provision where the employee has been continuously employed, as defined by the ERA 1996, throughout the series of contracts. There will be no limit on the length of a first, fixed term contract. Unfortunately service on successive fixed term contracts before the regulations come into force will not count. This means that it will be four years before Regulation 8 starts to bite.

The way in which rights under Regulation 8 are effected is for an employee who has been employed for four years on fixed term contracts to request in writing a written statement from their employer that their contract is varied and they are now employed on a contract of indefinite duration. Again a response must be provided within 21 days of the request and the statement can be used in proceedings (regulation 9).

The Regulations do represent a new era of rights for Fixed Term Contract employees and should prevent the wholesale discrimination that FTC employees have suffered. Although the use of FTC has become less widespread in certain sectors these employees' rights continue to be undermined by their status.