If you employ someone on a fixed-term basis for four years they become permanent staff.
According to the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, this is always the case “unless employment on a fixed-term contract is objectively justified”.
In a recent case, however, an employee that sued her employer on this basis found the law was not in her favour.
In the case of Hudson vs Department of Work and Pensions, Ms Hudson claimed her employer should deem her a permanent employee as, by April 2010, she had worked for them on fixed-term contracts for over four years.
Unfortunately for her, there is an exception to the 2002 Regulations. Put simply, if you employ someone on a training or work experience scheme arranged by the Government or funded by the European Community, this contract does not count towards the four years.
As Ms Hudson had been employed under such a scheme from 2006 to 2009, this period did not count towards her four years of fixed-term employment for permanent status.
What the recent court case on fixed-term contracts means to employers
As an employer, this is an important decision for you as fixed-term contracts usually end on an agreed date without the need for you to give notice.
However, if a fixed-term position becomes permanent then you have to find another legitimate reason for the dismissal and you may even have to give the relevant amount of notice based on the number of years the employee has worked for you unless the fixed term contract is drafted with an in-built notice provision.
That’s four weeks’ notice for a permanent employee who has worked for you for four years, as opposed to no notice for employees on fixed-term training and work experience contracts.
In the Hudson case, the Court of Appeal also suggested this could apply to apprenticeships, so it’s a significant decision for many companies and organisations.
But, you still need to be wary of unfair dismissal rights!
You may think that if the fixed term contract expires then this is not classed as a dismissal. This is not correct. When a fixed term contract expires the Tribunal will see this as a dismissal.
Employees gain the right not to be unfairly dismissed once they have been employed for 2 years (if they started employment on or after 6 April 2012 – the requirement is for continuous employment of 1 year if they were employed before 6 April 2012).
If you give staff one or a series of fixed-term contracts that add up to two years without a break, they too will be entitled to make an unfair dismissal claim after two years, just like a permanent employee.
This is the case even if they do different jobs on different contracts. If they have been working for the same employer for two years their right to claim unfair dismissal kicks in.
In other words, fixed-term and permanent employees get exactly the same unfair dismissal rights after two years of employment.
This means you will have to find a legitimate reason for dismissing them, follow a fair procedure and give them notice, rather than simply letting them go at the end of the term.
If you are unsure about the rights of your fixed-term staff, please contact our Employment & HR team on 01332 226 149 for a confidential chat.