When Temporary turns to Permanent
Many Community Sector employers engage staff on a temporary or fixed term basis. Prior to the enactment of the Protection of Employees (Fixed – Term Work) Act 2003 in July 2003, employees engaged under fixed term or specific purpose contracts of employment were outside the scope of the Unfair Dismissals Acts irrespective of the number of occasions on which their contracts were renewed and also their cumulative years of employment.
The 2003 Act introduced far reaching changes designed to improve the quality of fixed – term work. The Act applied the principle that fixed term workers may not be treated less favourably than comparable permanent workers with respect to all terms and conditions of employment e.g. Remuneration, Leave Entitlements, Pensions, and Sick Pay etc. The Act ensures that all entitlements and rights afforded to permanent employees will also apply to fixed term employees. It also ensured that time spent by an employee on a fixed term contract will count as reckonable service for Redundancy calculation purposes. It removed discrimination against fixed – term workers and established a framework to prevent abuse arising from the use of successive fixed – term employment contracts.
One of the principal changes introduced by the Act was to create maximum four year duration for successive fixed term contracts after which the contract is converted into one of indefinite duration i.e. a permanent contract. Subject to one exception, it is no longer possible for an employer to employ an employee under a series of fixed term contracts for an indefinite period. Once an employee has completed three years continuous employment with his or her employer or an associated employer the employer may only renew the contract for a fixed term on one occasion only and that renewal may not be for a period in excess of one year. Thus if, for example, an employee is engaged under a series of three one year contracts the fourth contract may not exceed one year.
It is clear from a Labour Court decision that if the renewal contract offends this provision the relevant clause providing for the termination of the contract at the end of the fixed term is void even if both parties have signed up to it. This results in the contract automatically becoming one of an indefinite duration. In other words, the fixed term contract becomes a permanent contract thereby affording a full range of protections for the employee including the right not to be unfairly dismissed. Similarly the Act specifically prohibits the aggregate duration of fixed term contracts entered into after 14th July 2003 exceeding four years.
The Act also provides that at the commencement of an employee’s temporary employment he or she must be provided with information relating to the circumstances which will bring about the termination of the contract such as reaching a specific date, the completion of a specific task or the occurrence of a specific event. Upon a renewal of a fixed term contract the employee is also required to be informed in writing by the employer of the objective grounds justifying the renewal of the fixed term contract and the failure to offer a contract of an indefinite duration.
There is an important exception. The above entitlements do not apply to a renewal of a fixed term contract where there are objective grounds justifying such a renewal. If the objective grounds exception is to be relied on the employer must establish that: -
- there is a legitimate objective to be achieved by employing an employee on a fixed term contract;
- the means chosen must be proportionate to the legitimate objective; and
- the means chosen must be necessary to achieve the objective i.e. there is no other alternative means by which the objective can be achieved.
Many Community Sector employers employ people on fixed term contracts subject to continued funding. This may be considered an objective ground to justify continued renewals. However, it is important to note that each case is considered on its own merits and is open to interpretation from a Rights Commissioner or Employment Appeals Tribunal.
In the event of a dispute the Labour Court will require the employer to establish credible evidence in support of their decision. These grounds must be applied at the time when the relevant contract is renewed, not retrospectively. It would be prudent for employers to adopt relevant policies if they wish to avail of the objective criteria exception and ensure that they are applied in a consistent manner.
In recognition of the fact that many employees employed under fixed term contracts aspire to becoming employed under permanent contracts, the Act creates a specific obligation on employers to inform employees engaged under fixed term contracts of all vacancies which become available and to ensure that such employees are afforded the same opportunity to secure a permanent position as other employees. This information may be provided by means of a general announcement at a suitable location in the workplace. Employers are also required to facilitate access by fixed – term employees to appropriate training opportunities to enhance his or her skills, career development and occupational mobility.