Regulating part and fixed term workers
Jo Seery, a solicitor in Thompsons’ Employment Rights Unit, looks at a number of recent decisions on comparators and objective justification under regulations governing part timers and fixed term employees.
There has been relatively little case law since the government introduced regulations protecting part time and fixed term workers in 2000 and 2002 respectively. This was mainly because the legislation required claimants to find actual (as opposed to hypothetical) comparators unlike other discrimination legislation, making it more difficult for them to succeed.
What do the regulations state?
The part time workers regulations state that employers cannot treat part time workers (as opposed to just employees) less favourably than comparable full timers and must not be subjected to any disadvantage (or detriment) by their employer because of their part time status, unless they can justify it.
Likewise, the fixed term employees regulations state that employers cannot treat employees on fixed term contracts less favourably than comparable permanent employees, unless they can objectively justify the treatment.
Who is the comparator?
Fixed term employees who think they have been treated less favourably have to compare themselves with someone doing the same or broadly similar work, who is employed by the same employer. They cannot, however, compare themselves with a permanent employee who used to work for the employer but has now left their job.
Similarly, part time workers have to compare themselves with someone doing the same or broadly similar work. However, that worker must also be someone who is employed full time under the same type of contract whether on a permanent or fixed term basis.
The issue of comparators was considered in the leading 2004 case of Matthews v- Kent & Medway Towns Fire Authority in which part time fire fighters claimed they were treated less favourably because they were denied access to the pension scheme.
The House of Lords held that, when considering whether the comparators were engaged in the same or broadly similar work, tribunals should focus on the similarities of the work being done as well as the importance of the work to the employer as a whole rather than the differences between the two groups.
Pro rata principle
Less favourable treatment is subject to two tests – the pro rata principle and objective justification.
The pro rata principle allows employers to claim that, although the part time worker or fixed term employee was treated less favourably, it was in proportion to the terms on which they offered pay and/or benefits to other workers.
For instance, holidays – these should be pro rated for a part timer in line with the number of holidays for a full timer, based on the number of part time hours they work.
The same principle does not, however, apply to overtime, with the result that part time workers cannot claim less favourable treatment when they are not paid overtime until they have worked the same hours as a full timer.
The fixed term regulations, on the other hand, allow employers to adopt a “package” approach. This is contrary to equal pay legislation, which allows a term-by-term comparison. In practice, the package approach means that employers can pay their fixed term employees a higher rate of pay instead of providing them with the same benefits as other employees.
Take pensions as a good example. According to guidance issued by the government, employers may be able to justify preventing someone on a very short fixed term contract from joining the pension scheme if they pay into a stakeholder pension. However, there is no onus on the employer to ensure that the fixed term employee does not lose out if the stakeholder pension pays out a lower benefit than the company pension scheme.
Employers can also justify less favourable treatment of a part time worker or fixed term employee if they can show that the treatment was necessary and appropriate to achieve a legitimate aim, such as a genuine business objective.
However, a number of recent decisions have set some limits on the test of objective justification. The European Court of Justice ruled in 2006 in Adeneler -v- Ellinikos Oranismos Galaklos and the 2007 case of Del Cerro Alonso -v- Osakidetza-Servicio Vasco de Salud that reliance on a general law or collective agreement will not amount to objective justification.
Instead, it said that, to establish objective justification, courts have to look at the “precise and concrete factors characterising the employment condition to which it relates, in the specific context in which it occurs and on the basis of objective and transparent criteria in order to ensure that the unequal treatment in fact responds to a genuine need, is appropriate for achieving the objective pursued and is necessary for that purpose”.
The test of objective justification applies not just to less favourable treatment but also to the use of successive fixed term contracts. Employers often cite lack of funding as an objective justification for not making a fixed term employee permanent.
It is worth noting that cost, in and of itself, is generally not a good enough reason under other discrimination legislation to amount to objective justification and a justification defence on the grounds of limited funding is arguably cost by another name.
The issue of limited funding as justification for retaining a contract researcher on a fixed term contract was considered by a Scottish tribunal recently in the case of Dr Ball -v- the University of Aberdeen. It accepted that the tests in Adeneler and Del Cerro were similar to the tests applied in other discrimination legislation and as such the correct approach was to consider whether there was a genuine business need to be addressed and whether the use of a fixed tem contract amounted to “means” that were necessary and appropriate to meet that need.
In applying this test, the tribunal decided that the business need for the university was how to cope with the fact that the research funding from grant-giving institutions was short term.
It therefore had to consider the disadvantages to the employee (uncertainty of future employment, disadvantage in terms of career prospects and potential difficulties in obtaining credit) against the advantages to the employer.
It rejected the employer’s argument that it would be too expensive to retain Dr Ball beyond the end of the fixed term contract as a red herring, and said that, in attempting to match up future labour needs with future revenue, the University was really in no different a position to many other employers.
The choice for the employer was to employ Dr Ball on a fixed term contract or an indefinite contract with the possibility of his being made redundant.
Although both sets of regulations have very definite limits (and employers have made maximum use of them), it looks as though the courts are now prepared to put employers under more scrutiny, at least as far as objective justification is concerned.
If tribunals continue to turn down employers’ arguments when they try to justify business practices that are clearly beyond the pale, then the regulations may, finally, turn out to be worth the paper they were written on. Watch the weekly LELR online newsletter for further developments.