Justifying renewal of a fixed-term contract after four years

Fixed-term employees’ wide-ranging rights and remedies are set out in the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the Regulations).

These rights include the right not to be treated less favourably than comparable permanent employees unless the employer can show there is objective justification for the difference in treatment.

Regulation 8 provides that where an employee has been employed on a series of fixed-term contracts for a period of four years or more, the employee will become a permanent employee unless the continued use of a fixed-term contract can be objectively justified.

What is objective justification? Employers will need to establish that:

• They have a legitimate objective.
• It is necessary to achieve that objective.
• It is an appropriate way to achieve that objective, that is, the employer has acted proportionately.

This will be assessed taking into account the needs and rights of individual employees and the need to balance those rights against business objectives.

Employment Tribunal

The Employment Tribunal made a series of findings of fact about the differences between the claimant’s locum role and that of a substantive Consultant Breast Surgeon:

• The locum Consultant role is fundamentally a service delivery clinical role.
• Substantive Consultants undertake wider managerial/governance work including audit, governance, internal/external meetings to discuss service performance and strategy. Locum consultants do not.
• Locum Consultants are not expected to carry out job planned formal teaching or research as part of the role but substantive Consultants are.

The substantive Consultant role and the claimant’s locum role were different and the Service did not require a permanent locum Consultant.

The Employment Tribunal had to consider whether or not, at the time of the most recent renewal of the claimant’s fixed-term contract, that decision could be justified on objective grounds. If it could not be justified, the claimant’s contract would cease to be a fixed-term contract and it would convert to a contract of indefinite duration on the same terms and conditions. If the renewal could be objectively justified, no declaration would be made.

The respondent’s argued that it had the legitimate aim of providing a safe, efficient, and fully functioning Service. It was appropriate and necessary to engage the claimant on a fixed- term contract because:

• The Service should not be left under-staffed where this is avoidable.
• It would be disproportionate and inefficient to terminate the claimant’s fixed term contract and recruit a new Consultant on a fixed-term contract for an interim period until such time as a substantive appointment was made.
• There was a clear need for the Service to recruit a permanent substantive Consultant.

The Employment Tribunal held that the respondent had established justification. At the date that the latest fixed-term contract was renewed, the Service review was complete. It was accepted that the respondent needed to appoint a substantive Consultant Breast Surgeon. Although the claimant had applied for that position again after it had been advertised nationally, her interview took place after she had brought her Employment Tribunal claim. She was unsuccessful.

The Employment Tribunal agreed that it was appropriate and necessary to meet patients’ needs, pending the appointment of the substantive Consultant, by using a fixed-term contract for a locum Consultant.

The use of a fixed-term contract in the claimant’s case was neither abusive nor discriminatory in all the circumstances.

Comment on renewal of fixed-term contracts

This is an interesting decision because it relates specifically to whether or not continued use of fixed-term contracts could be justified. It illustrates that what is important in establishing objective justification is fact-specific. Indeed, the Employment Tribunal looked at the “circumstances, context and background of this employer” in considering that issue.  

As mentioned at the outset, the Regulations provide wide-ranging rights for fixed-term employees. However, fixed-term employees who work continually for the same employer for two years or more gain certain statutory rights as well. These include the right not to be unfairly dismissed and the right to a statutory redundancy payment if the reason for the non-renewal of their contract is redundancy. Finally, it is important to remember that the non-renewal of a fixed-term contract at the expiry of its term constitutes a dismissal and needs to be dealt with carefully.