Fixed Term Employees (Prevention Of Less Favourable Treatment) Regulations 2002

When did these regulations come into effect?
These regulations came into force on 1st October 2002 and apply to employees on a fixed term contract.

What is a fixed term contract?
A fixed term contract is defined as:

a) Contracts that last for a specified period of time, or

b) Contracts that will end when a specified task has been completed, or

c) Contracts that will end when a specified event does or does not happen.

b) and c) above are known as "task contracts".

Examples of fixed term employees may include those employees covering maternity leave of another employee, seasonal or casual workers, agricultural workers, employees hired to cover peak demand periods etc.

What new rights do fixed-term employees have?
As from 1st October 2002, fixed term employees now have the following rights:

1. Not to be treated less favourably than comparable permanent employees.

2. A right to receive a written statement from their employer setting out the reasons for the less favourable treatment.

3. A right to treat their contract as a permanent contract if it is successively renewed for more than 4 years.

4. A right to qualify for statutory redundancy payment if they have been employed for the necessary period.

5. A right to receive information on permanent vacancies within the organisation.

6. A right for employees on "task contracts" as well as specified period contracts to claim unfair dismissal at the end of the fixed term contract if it is not renewed and to receive a written statement from the employer with reasons for the dismissal.

7. Employees on fixed term contracts of three months or less now have a right to Statutory Sick Pay and to Payments on Medical Suspension and guarantee payments, (once they have been employed for 1 month).

8. Employees on fixed term contracts of 3 months or less now have a right to receive 1 week's notice after they have served 1 month's continuous service if the employer wishes to bring the contract to an end before it is due to expire. They must also give 1 week's notice to the employer if they wish to terminate the contract themselves before the expiry date.

9. A right to access to the employer's occupational pension schemes. The rights under 1, 3 and 9 can be denied by the employer if they can justify this on objective grounds (see below).

Are all fixed-term contract employees covered by the regulations?
The following categories of fixed-term employees are not covered by the regulations:

i) Members of the armed forces.

ii) Agency workers who are placed with the employer by a temporary work agency.

iii) Apprentices or students on work experience placements of 1 year or less which are undertaken as part of a higher education course (university students doing holiday jobs which are not part of their course would be covered).

iv) Those employed on training, work experience or temporary work schemes which are funded by the government or an EC institution. (The regulations do apply however, to those employed on the New Deal subsidised employment option.)

How is less favourable treatment proved?
This is assessed in one of two ways:

1. If it can be shown that the fixed-term employee's terms and conditions of employment are less favourable than a permanent employee, or

2. The fixed term employee's overall package is less favourable than a permanent employee's. This may be assessed on a pro-rata (proportion) basis.

Fixed term employees can compare their terms and conditions or overall package with those employees working for the employer who are not on fixed term contracts and do the same or broadly similar work.

If there is no comparator within the establishment, then a comparison can be made with a permanent employee working for the same employer in another establishment. Comparisons cannot however, be made with someone at an "associated" employer's establishment.

What is the purpose of the written statement an employer must provide?
If a fixed-term employee requests a written statement setting out the reasons for the less favourable treatment, then an employer must provide this statement within 21 days of the request. The purpose is to clarify the reasons for the less favourable treatment, as an employer may be able to justify it on objective grounds. The statement will then be used by a tribunal to decide if the less favourable treatment is justified.

What is meant by objective justification?
The employer must simply show that they have considered and balanced the rights of the employee against business objectives. As long as they can show it is a genuine objective and that the treatment was necessary and appropriate to achieve that objective, then the treatment will be justified.

Employers should consider whether it is possible to offer alternatives to the fixed-term employee, which might match a similar permanent employee's terms or package in kind.

What is the extent of a fixed-term employees rights on redundancy?
A fixed-term employee who has been continuously employed for a period of two years or more will qualify for statutory redundancy pay. As from 1st October 2002, it is no longer permissible for a fixed-term employee to contract out of their right to redundancy by signing a "redundancy waiver".

However, if a fixed-term contract is already in existence and with a signed waiver clause, which pre-dates 1st October 2002, then it will still apply. However, if that contract is subsequently renewed or extended, the waiver clause will become invalid.

Fixed-term employees can be excluded from company contractual redundancy schemes if the employer can objectively justify doing so.

Can I use successive fixed-term contracts anymore?
Yes, but the use of successive fixed-term contracts will be limited to four years unless the employer can justify the use of further contracts on objective grounds.

Also, employers and fixed-term employees can agree to increase or decrease the period by entering into collective or workforce agreements. Service accumulated from 10th July 2002 will count towards the four-year limit.

There is no limit on the duration of the initial fixed-term contract. However, if it is for more than four years and it is then renewed, it will be treated as a permanent contract, (unless the employer can show objective justification).

A fixed-term employee can ask their employer for a written statement confirming that their contract is permanent or setting out the objective justification for using the fixed-term contract beyond the four-year period. The written statement must be provided within 21 days of the request.

What action do I need to take now?

Consider whether occupational pension schemes have a vesting period, which might bar certain fixed-term employees. If so, exclusion of the fixed-term employee from the scheme may be justified, but an equivalent salary increase would remove the less favourable treatment problem, or payment of contributions into the fixed-term employee's stakeholder or private pension scheme.

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