Fixed-Term Contract

Expiry of a Fixed-term Contract

Fixed term meaning

For a contract to be for a fixed term, the end date must be predictable when the contract is made. In accordance with Reg. 1(2) Fixed-term (Prevention of Less Favourable Treatment) Regulations 2002 as amended a fixed term contract is a contract which will terminate on:

1. a specific date or after a specified period of time;

2. the completion of a particular task; or

3. the occurrence or non-occurrence of a specific event.

Expiry of a fixed term without renewal

Expiry of a fixed term contract without renewal is:

1. a dismissal for statutory purposes; but

2. not a dismissal at common law.

This means that an employee could use the expiry of the contract as a basis for an unfair dismissal claim but not for a wrongful dismissal claim. Expiry of a limited-term contract (also known as ‘fixed-term contracts’) without renewal is deemed to be a dismissal for statutory purposes (s.95(1)(b) ERA).  This means that employers who fail to renew these contracts on their expiry are liable to unfair dismissal or redundancy pay claims. Expiry of a limited-term contract is not a dismissal for contractual purposes so cannot be used as a basis for wrongful dismissal claims.

Notice periods in fixed term contracts

Note that it is possible (and frequently arises in practice) for a fixed term contract to contain a notice clause. Such a clause may be drafted thus: “This contract is to continue until 30 April 2023 unless terminated earlier by either party giving to the other not less than three months’ notice in writing”. When dealing with the termination of a fixed term contract, it is important to check whether that contract contains a notice provision. If it does not, damages for breaching that contract will run to the end of the fixed term (as opposed to simply the end of the notice period).

Fixed-term Regulations 2002

Fixed-term employees are afforded protection by the Regulations. This protection encompasses, for example:

• the right to be treated no less favourably than a comparable permanent employee in relation to any contractual term including pay and benefits;

• the right to information about any permanent vacancies the employer may have; and

• the right to statutory minimum notice for short-term contracts of three months or less.

Fixed-term employees who have been continuously employed for four years or more on a series of successive fixed-term contracts will automatically be treated as permanent employees (that is, employed under an indefinite contract), unless the continued use of a fixed-term contract can be objectively justified. This applies only if the employee has been continuously employed for four years or more on a series of successive fixed-term contracts.

Comparable permanent employee

A comparable permanent employee will be a person who is not on a fixed-term contract but who is employed by the same employer at the same establishment performing "the same or broadly similar work," taking into consideration whether or not they have equivalent qualifications or abilities, if applicable. This employee will be referred to as a comparable permanent employee.

Less favourable treatment

Employees on fixed-term contracts are not to be treated less favourably. This may be because their contract conditions are less favourable than those of a similar permanent employee, or for any other reason. The Regulations make it clear that getting training and having the chance to land a permanent job in the institution are both covered by the right not to be treated less favourably. For instance, fixed-term workers have the right to be treated equitably if they want to apply for permanent job opportunities and to be notified about these openings.