New rights for employees engaged under fixed term contracts

It is common, in the media and entertainment industries, for employees to be engaged for a fixed period of time and for any renewal of that contract to be dependent on the employer’s requirements. An Employment Appeal Tribunal case at the end of last year highlighted a possible pitfall for employers who utilise consecutive fixed term contracts. The EAT held that a series of fixed term contracts, each for less than a year and despite there being a gap between them, could give an individual sufficient continuity of service to bring a complaint of unfair dismissal against his or her employer.

In respect of contracts for a fixed term of a year or more, the statutory provision which allowed employees to waive their rights to claim unfair dismissal on the expiry of the contract was repealed on 25 October 1999. Any term in such a contract which purports to exclude an employee’s right to claim unfair dismissal is invalid. However, it is still lawful for a fixed term contract of at least two years to include a waiver of the employee’s entitlement to a redundancy payment.

The UK has to comply with the EC Directive on fixed term contracts by 10 July 2002. The government has recently published the second draft of the Fixed Term (Prevention of Less Favourable Treatment) Regulations 2002, which are intended to implement the directive, and has allowed a further period of consultation until 15 April 2002. The Regulations define a fixed term contract as one which is made for a specific term or one which terminates automatically on the completion of a specific task.

The draft Regulations include the following rights for fixed term employees:

  1. a right not to be treated less favourably than a comparable permanent employee, unless objectively justified;
  2. a right to receive a written statement of reasons for any treatment that he/she considers to have been unfavourable;
  3. protection against dismissal for seeking to enforce any of his/her rights under the Regulations;
  4. a right to have the fixed term contract converted to a permanent contract on its next renewal/extension if he/she has been employed for over 4 years, unless objectively justified;
  5. abolition of the ability to enter into waiver clauses to exclude an employee’s right to a redundancy payment.

These Regulations will have a significant impact on employers who have employees engaged under fixed term contracts.

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.