Fixed term employee dismissals

If the Fixed Term Worker Directive, the EU law that provides for employment protection for fixed term workers, is to be believed “contracts of an indefinite duration are, and will continue to be, the general form of employment relationship between employers and workers.” I have to say I have some scepticism of that statement and have seen fixed term appointments being used for much more than just short term projects and similar with limited opportunity for redress but despite this the Directive does provide some important protections which are incorporated into UK law in the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

As a matter of law, section 95(1)(b) of the Employment Rights Act 1996 stipulates that an employee whose fixed term contract is not renewed by their employer upon expiry has been dismissed from their employment. And, because they have been dismissed, they may if they meet all qualifying conditions for such a claim make a complaint to an employment tribunal that they have been unfairly dismissed.

As with any ordinary unfair dismissal claim an employer needs to advance a potentially fair reason for dismissal and, if this is accepted, there will then be a consideration of whether the dismissal was reasonable under section 98(4) of the 1996 Act. In many fixed term cases if there is a no longer a need to continue the work (for example a project has ended) then there will be a potentially fair reason which is a dismissal for “some other substantial reason.”

The decision of the  Employment Appeal Tribunal in Royal Surrey County NHS Foundation Trust v Drzymala [2018] UKEAT 0063_17_1101 offers a helpful example of how a fixed term worker can who is dismissed for a fair reason may still nonetheless by unfairly dismissed.

The facts of the case are straight-forward and quite common. An employee had been employed on a fixed term contract of six months, and that contract had been extended five or six times. Shortly after she had been unsuccessful in obtaining a permanent contract the employer wrote to her giving her three month’s notice that her contract would not be renewed. There had been no discussion with the claimant before the notice was given and there was no right of appeal mentioned in the letter.  The claimant alleged she had been unfairly dismissed because of two factors: that there was no right of appeal given to the dismissal, that there was no consideration of alternative roles despite there being a possibility that one was available.

A line of defence the employer offered was that there had been no breach of the fixed term worker regulations, a defence that math EAT rejected, saying “The main submission … was that compliance with the 2002 Regulations meant the dismissal was necessarily fair. That is, as already explained, wrong. The 2002 Regulations sit alongside the unfair dismissal regime and compliance with them does not of itself afford a defence to an unfair dismissal claim where the dismissal is effected by non-renewal of a fixed-term contract.” In the present case the EAT endorsed the Tribunal’s view that the failure to discuss alternative employment and failure to give an appeal rendered the dismissal unfair.

This is a helpful case, that points out that it is not necessarily fair for an employer to simply let fixed term appointments lapse, and there must be some considerations as to the fairness to the employee. The EAT also gave some guidance on the nature of such considerations commenting that:

This was not a conduct or a capability dismissal. It was a “some other substantial reason” case. It is well established that to act reasonably under section 98(4) in such a case an employer may, depending on the facts, have to engage in some degree of discussion or consultation. In such cases, the emphasis is more on the “equity” part of the fairness test and less on the “substantial merits” part of the test.

A dismissal by non-renewal of a standard fixed-term contract may, depending on the facts, have some features in common with a redundancy dismissal or, where there is no redundancy situation, with a non-redundancy “business reorganisation” case, or a case where the employer wishes to impose changed working practice or terms of employment on an unwilling or reluctant employee. Possible alternatives to dismissal may need to be discussed as a matter of fairness, where such alternatives are or may be available.

Of course, the two year qualifying period that must be worked before an employee can make an ordinary unfair dismissal claim disproportionately affects fixed term employees given the common practice of limiting contracts to eleven months when the qualifying period was one year and, more recently, twenty-three months when the period is two years in order to evade any risk of employee litigation. Therefore, while not a significant help for many fixed term workers who work less than two years before being replaced this does provide a basis for employees and union negotiators to secure better conditions of work and more job security as any unfair practices may provide a basis for legal challenge.