Tribunal delivers warning on expiry of fixed-term contracts

Background

Owing to the flexibility and low risk involved, fixed term contracts (FTCs) have slowly become the go-to contract of choice in many sectors throughout the UK.

Whether utilised for project work or for covering maternity leave, FTCs offer reassurance for management and HR that a potentially fair reason can be given at the end of the contract without the worry of a potential claim against the business from a fixed term employee.

It is, however, easy for employers to fall into the trap that expiration of a FTC can be signaled by simply providing the employee the notice stated for in the contract. Employers often forget, or are in fact ignorant to, the fact that a reasonable process is often required, such as that used for a permanent employee with similar service.

In the recent Employment Appeal Tribunal case of Royal Surrey County NHS Foundation Trust v. Drzymala, the NHS Trust fell into just such a trap.

Ms Drzymala had been employed by the NHS Trust as a locum doctor on a series of FTCs, lasting just short of three years. In April/May 2014, and prior to the end of her latest FTC, Ms Drzymala applied for a permanent position that had become available within the NHS Trust. She was unsuccessful in the interview process and remained on the FTC until its expiry on 30 September 2014. Prior to the expiry of the FTC, the NHS Trust gave notice as required by the contract. No right of appeal was given to Ms Drzymala nor was any alternative employment explored.

Ms Drzymala submitted a grievance, the outcome of which was not delivered until after the expiry of her FTC. Some six weeks after the expiration of the FTC, the NHS Trust gave Ms Drzymala the right to appeal the grievance decision.

The outcome of her grievance appeal was delivered to Ms Drzymala in March 2015, some six months after she had finished with the NHS Trust. In the appeal outcome letter, the Trust accepted that the original letter giving notice should, have contained a right to appeal, but that “an earlier appeal would have made no substantive difference to the outcome”.

ET Decision

Ms Drzymala brought a claim in the Employment Tribunal claim for age discrimination and unfair dismissal. The age discrimination claim failed.  However, Ms Drzymala was successful in her unfair dismissal claim.

As part of its findings, the Tribunal stated that they were not satisfied that the dismissal was fair owing to the following reasons:

“…there was other employment available for the claimant; the claimant was denied a timely right of appeal; the respondent is the largest (or one of the largest employers in Surrey) with professional human resources and other administrative resources; and it was unreasonable to deny the claimant the right of appeal.”

The NHS Trust appealed the decision.  The Employment Appeal Tribunal heard the case on 19 December 2017 with the Judgment released on 11 January 2018.

EAT Decision

The Employment Appeal Tribunal agreed with the Employment Tribunal and confirmed the finding of unfair dismissal. After hearing arguments from both sides, the EAT confirmed that it could find no reason to depart from the ET’s findings. The ET had been entitled to find that the absence of a reasonable procedure by the NHS Trust in offering a timely appeal or pursuing any alternative work for Ms Drzymala was enough for the dismissal to be unfair.

The Employment Appeal Tribunal were quick to point out that this case does not raise  any new issues of law, rather it confirms the law as already in place: “Whether the employee is treated fairly in such a case is a question of fact for the Employment Tribunal, as it is in any other unfair dismissal claim”.

What should you be doing now?

Whilst fixed term contracts can be appealing to businesses, especially those working on projects or where funding from a third party is not guaranteed year on year, it is clear that pitfalls await employers who are not aware of the detail of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

Employers should log all fixed term employees start and finish dates and ensure that such a log is kept under constant review. In particular employers should be aware, in plenty of time, the requirement for notice periods and, if applicable, any employee approaching two and four years’ service (see below).

Employers should also be aware that the above Regulations serve to ensure that fixed term workers do not suffer less favourable treatment compared to their permanent colleagues. This can be anything from not being provided with similar benefits, to not being made aware of internal job openings. 

What does this mean for you or your business?

Employers should keep in mind that non-renewal of a fixed term contract still constitutes a dismissal in law. In practice  this means that any contract which is either not renewed or which is not extended on the same terms as before, will give the employee the same employment protection rights as a permanent employee (with the same length of service) who has been dismissed.

The reason for non-renewal of a fixed term contract will usually be for some other substantial reason (SOSR). Some employers commonly use redundancy as a reason for ending fixed term contracts.  However, redundancy can bring its own complications, including searching for alternative work, redundancy payments and identifying the correct pool. In Greater Glasgow Health Board v Lamont UKEATS/0019/12, the Scottish EAT confirmed that where a fixed term position is solely to cover the absence of a permanent employee, and the permanent employee returns to the same job, the reason for ending the contract is SOSR, not redundancy.  Care should be taken about the grounds on which a fixed term worker is dismissed.  Remember that fixed term workers do not need two years’ service to argue unfair dismissal on the basis of fixed term worker status. 

Employers should also be aware of providing employees a series of fixed term contracts spanning more than four years. Regulation 8 of the fixed-term workers Regulations confirms that an employee automatically becomes a permanent employee at this stage unless the employer can objectively justify the continued use of fixed term contracts.  This can often be difficult to justify in practice.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.