MJ O'Connor Solicitors

The Brief

22.03.2007

Employment law - When temporary turns permanent

Most employers will have the need from time to time to engage staff on a temporary basis - to fill a position pending a permanent appointment, to provide ongoing cover for annual leave, sick leave, sabbatical leave, maternity leave or career breaks. In some work sectors, particularly in schools, colleges, universities, hospitals and clinics, employers may be undertaking specific projects and initiatives which, by necessity, have a preordained end date such as scientific and medical trials and research and the reduction of hospital waiting lists.
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 in 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. It removed discrimination against fixed – term workers and established a framework to prevent abuse arising from the use of successive fixed – term employment contracts.

The Act applies to all fixed – term employees working under contracts of employment or holding office in the service of the State including members of the Garda Siochana, civil servants and employees of the Health Service Executive, harbour authorities, local authorities or vocational education committees except members of the Defence Forces, and nurses and members of the Garda Siochana engaged under training contracts.

The Act provides that a fixed – term employee shall not be treated in a less favourable manner in respect of his or her conditions of employment than a comparable permanent employee unless the employer can establish that such treatment can be justified on objective grounds (for which see below). For example, a fixed term employee is now entitled to be afforded access to overtime facilities made available to permanent employees and to equal holiday entitlements.

One of the principal changes introduced by the Act was to create a 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 the Labour Court decision in September 2006 in HSE North Eastern Area – and – Dr. M. J. Khan 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, resulting 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.

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. This issue has given rise to a relatively large number of cases since 2003. As recently as April 2006 in HSE – and – C.V.R. Prasad the Labour Court emphasised the importance of ensuring that the principles established in decisions of the European Court on this subject are followed in Ireland. Under these principles, if the objective grounds exception is to be relied on the employer must establish that:-
(a) there is a legitimate objective to be achieved by employing an employee on a fixed term contract;
(b) the means chosen must be proportionate to the legitimate objective; and
(c ) 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.
As the objective grounds exception constitutes a derogation from what is an important social right derived from EU law, it is applied strictly against the employer and in the event of a dispute the Courts will require the employer to establish credible evidence in support. These grounds must be applied at the time when the relevant contract is renewed, not retrospectively. Prudent employers should therefore adopt relevant policies if they wish to avail of the objective criteria exception and ensure that they are applied in a consistent manner.

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.

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.

The subject of fixed term employment contracts was recently considered in the High Court case of Louise Doyle -v- The National College of Ireland, where a college lecturer was employed under a three year fixed term contract. The contract contained a clause whereby either party could terminate the contract prior to the expiry of the three year term by giving three months notice (Such a provision for early termination would not be uncommon in a fixed term contract). After 12 months of service the College terminated the contract under the early termination clause. It appears that the purpose of hiring the lecturer on a fixed term contract was to provide cover for another employee who was on maternity leave. The High Court upheld the entitlement of the parties to agree that a fixed term contract could be subject to early termination prior to the expiry of the fixed term and thus the College was entitled to terminate by service of notice. However, it held that the College had misrepresented its position and had not discharged its duty of care to its prospective employee at interview. The Court found that the College had not disclosed to its prospective employee that the member of staff whom the prospective employee was replacing was on maternity leave or that the contract would provide for termination before the expiry of the fixed term. The Court did not accept the College’s argument that by entering into a contract containing the early termination clause this exonerated the College from its misrepresentation at the interview.

This case has significant ramifications for employers who wish to enter into a fixed term contract which allows for earlier termination by either party. The lesson here is that the employer must be sufficiently candid in disclosing the purpose of the fixed term contract and must specifically draw to the attention of the employee the fact that the contract provides that it can be terminated prior to the expiry of the fixed term. The creation of a duty of disclosure in relation to the legal effect of a contract represents a significant extension of the law in this area and will no doubt need to be clarified in the Supreme Court. Needless to say whether an employer has discharged such duty of disclosure will depend on the facts of each case. It would be prudent, however, to ensure that this issue is specifically addressed in a prominent manner in the interview and evidenced in the relevant offer letter or the contract of employment.

Given that many employees currently employed under fixed term contracts will (on account of reaching their fourth year of continuous employment following the enactment of the Act) shortly become entitled to claim a permanent contract under the Act employers should give consideration as to whether, and to what extent, they may continue to employ employees under fixed term contracts and whether pre-emptive action should be taken in relation to those who might become entitled to permanent contracts under the Act. By the same token employees and their representatives should consider whether such pre-emptive action might contravene the employee’s accrued rights under the Act.

For further information contact
Sean Nolan
M. J. O’Connor, Solicitors
Ph: 051-355663
Email: snolan@mjoc.ie
Website: www.mjoc.ie

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