Fixed Terms Contracts - Review of the Law

This article reviews the law relating to fixed-term contracts of employment.

The purpose of the Protection of Employees (Fixed-Term Work) Act 2003 (the “Act”) is to ensure that fixed-term employees are not treated less favorably than comparable permanent employees and to prevent abuse arising from the use of successive fixed-term contracts.

An employer is expected to make a fixed-term employee permanent at the end of a fixed-term contract if the employee's services are still required. Accordingly, an employer cannot renew a fixed-term contract unless there are objective grounds justifying the renewal. If an employer proposes to renew or extend a fixed-term contract, it must notify the employee in writing by the renewal date or earlier of the objective grounds justifying the renewal or extension and provide an explanation as to why a permanent contract is not being offered. The Labour Court recently indicated that this requirement is mandatory in National University of Ireland Maynooth v Dr Ann Buckley Determination No FTD092.

In Gardiner Street Primary School v A Worker Determination No.FTD095 the Labour Court confirmed that if an employer seeks to rely on objective justification for the renewal of a fixed-term contract the objective grounds justifying such renewal must exist at the date of renewal.

Once it has been established that the renewal is objectively necessary, special rules need to be considered in relation to the renewal of successive fixed-term contracts. If a fixed-term employee is employed by his employer (or an associated employer) on two or more continuous fixed-term contracts which began after 14 July 2003, the aggregate duration of the contracts cannot exceed four years. If an employee has been employed on a fixed-term contract before 14 July 2003 and completes or has completed three years' continuous service with his employer (or an associated employer), then the contract can only be renewed on one more occasion and the term of the renewed contract cannot exceed one year. A provision in a fixed-term contract which purports to breach either of these rules will have no effect and the contract will be deemed to be a permanent contract.

The facts of National University of Ireland Maynooth v Dr Ann Buckley Determination No FTD092 are interesting. The claimant was employed on two successive fixed-term contracts and claimed that she was entitled to an indefinite contract. Her employer had failed to notify her in writing of the objective justification for renewing her contract by the renewal date.

The claimant had signed a contract agreeing to objective reasons for its renewal on a fixed term basis. A Rights Commissioner upheld her claim that she was entitled to a contract of indefinite duration and that she had not been informed in writing of the objective grounds justifying the renewal of her contract by the renewal date. Her employer appealed the decision to the Labour Court. Interestingly, the claimant sought an interlocutory injunction in the High Court restraining her employer from terminating her contract of employment and reducing her salary pending the determination of the Labour Court. However, the claimant failed to establish that she had a strong case that she was likely to succeed at the trial of the action and her application for an injunction was unsuccessful. The Labour Court subsequently determined that the claimant was not entitled to a contract of indefinite duration as she had signed a binding contract agreeing to its renewal on a fixed term basis and could not subsequently resile from this position.

An employee who is employed on a series of fixed-term contracts may be entitled to a permanent contract even if there was a break between the extension or renewal of each fixed-term contract as the breaks might be considered periods of lay off that do not break continuity of employment. Furthermore, a fixed-term employee may be entitled to a statutory redundancy payment at the end of his fixed term contract if he has at least two years' service.

A fixed-term employee can refer a dispute in relation to an entitlement under the Act to a Rights Commissioner and, depending on the circumstances, may be entitled to a permanent contract or compensation of up to two years' remuneration. Furthermore, disputes in relation to the dismissal of a fixed-term employee may, depending on the circumstances, be dealt with under the Act or the Unfair Dismissals Acts 1977-2007. The Employment Appeals Tribunal has jurisdiction to award up to two years' gross remuneration, reinstatement or re-engagement in the event that a claimant is successful in a claim under the Unfair Dismissals Acts 1977-2007.

In summary, whilst fixed-term contracts are a useful tool for employers, caution should be exercised when considering the renewal or extension of a fixed term contract.