Changes in the law for fixed-term employees

On 1 October 2002 Regulations come into force which make important changes in the way fixed-term employees are treated by the law.

The overriding principle of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 is that fixed-term employees should not be treated less favourably than comparable permanent employees unless this can be objectively justified. The Regulations apply to employees on contracts that last for a specified period of time or will end when a specified task has been completed or a specified event does or does not happen. The Regulations define permanent employees as those who are not on fixed-term contracts, i.e. those on contracts for an indefinite term.

Fixed-term employees can compare their conditions with employees who are not on fixed-term contracts and are employed by the same employer to do the same or broadly similar work.

There are two ways in which less favourable treatment can exist. Either the fixed-term employee’s terms and conditions are less favourable than the equivalent treatment given to the permanent employee or the fixed-term employee’s overall package of conditions is less favourable. To avoid any breach of the Regulations the less favourable treatment must be objectively justifiable.

A fixed-term employee can ask his or her employer for a statement setting out the reasons for the less favourable treatment and the employer must provide this within 21 days.

The use of successive fixed-term contracts will be limited to four years, unless objectively justified. If a fixed-term contract is renewed after the four year period with no break in the employee’s continuity of employment, it will be treated as a contract for an indefinite period.

Any waiver of an employee’s rights on a redundancy included in a fixed-term contract which is agreed, extended or renewed after 1 October 2002 will be invalid.

Fixed-term employees should receive information on permanent vacancies in their organisation.

The Regulations do not apply to employment under a fixed-term contract where the employee is an agency worker or where the employee is an apprentice.

The impact of these Regulations will vary depending on the nature of the employer’s business. Less favourable treatment will be justified on objective grounds if the terms of the fixed-term employee’s employment, taken as a whole, are at least as favourable as those of the comparable permanent employee. In light of the Regulations, employers should consider the terms on which any fixed-term employees are employed so as to avoid any less favourable treatment and any consequent complaint to an employment tribunal. If you would like advice on this, please contact Rachel Urquhart or any other member of the Employment Group.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.