Fixed-Term Employees Approach of the Four-Year Limit
The Regulations provided that the use of successive fixed-term contracts is limited to four years, unless the use of further fixed-term contracts can be justified on objective grounds by the employer. For the purpose of the four year limit, only service accumulated from 10th July 2002 onwards counts towards the four year limit.
No limit is imposed on the duration of an initial fixed-term contract. However, if it is for a term of four years or more and is then renewed, it will be treated from the date of renewal as permanent unless the continued use of a fixed-term contract is justified on objective grounds.
The limitation on successive fixed-term contracts only applies where the employee has been ‘continuously employed’ for the whole period. However, the rules on calculating continuous employment mean that an employee may sometimes be deemed to have been continuously employed even where there are gaps between contracts.
The Regulations also permitted employers to increase or decrease the four year period, or to agree a different way to limit the use of successive fixed-term contracts via a collective or workforce agreement. In order for such an agreement to disapply the four year limit, the agreement must, in order to prevent abuse arising from the use of successive fixed-term contracts, specify one or more of the following:
| • | the maximum total period for which employees may be continuously employed on a fixed-term contract or successive fixed-term contracts; or |
| • | the maximum number of successive fixed-term contracts and renewals of such contracts under which employees may be employed; or |
| • | objective grounds justifying the renewal of fixed-term contracts, or the engagement of employees under successive fixed-term contracts. |
What does 'Justified on objective grounds' mean?
The Regulations do not actually specify what this means, but Guidance issued by the DTI indicates that employers can continue to renew or extend fixed-term contracts for more than four years if:
| • | it is to achieve a legitimate objective, such as a genuine business objective; |
| • | continued use is necessary to achieve that objective; and |
| • | continued use is an appropriate way to achieve that objective. |
What might employees do?
From 10th July 2006, employees who consider that they should be accorded permanent status, are entitled to make a written request to their employer for a written statement confirming that either their contract is no longer fixed-term or that they are now permanent (there is no requirement for the employee to wait until the contract is due to come up for renewal).
Within 21 days of that request, the employer is obliged to provide that statement or a statement giving reasons, including the objective grounds if any, why the contract remains fixed-term.
If the employee is not satisfied with the written statement, or if the employer fails to provide one, the employee may apply to Tribunal for a declaration of permanent status. The burden of proof will lie with the employer to show that employment under a fixed-term contract is justified on objective grounds.
Key Point
Employers should start to examine their use of fixed-term contracts now – rather than waiting for July 2006. Fixed-term contracts do not have to be abandoned where they are necessary, but their use should not be indiscriminate.