UK: Revised Draft Fixed Term Employees (Prevention Of Less Favourable Treatment) Regulations Published For Consultation

Last Updated: 22 January 2002

The Government yesterday published for consultation (until 15th April 2002) a further draft of the Regulations intended to implement the EU Directive on Fixed Term Work. The final Regulations will come into force on 10th July 2002.

The original draft was published in March last year, but this did not cover pay and pensions, two of the key areas of discrimination against fixed term workers. A recent TUC survey of almost 200 unionised workplaces found that 47% paid fixed term workers lower rates than permanent workers and 70% did not offer the same access to occupational pension schemes. The Government considered that pay and pensions were not covered by the EU Directive and therefore primary legislation would be needed to permit such provisions. The Employment Bill published in November and currently before Parliament gives the Government the necessary authority to make regulations covering pay and pensions. The draft Regulations cover two main areas: discrimination against fixed term employees and the prevention of abuse arising from the use of successive fixed term contracts.

Discrimination against fixed term employees

The draft Regulations provide that a fixed term employee has the right not to be treated less favourably because of his fixed term status than a comparable permanent employee engaged in the same or broadly similar work, either in connection with terms and conditions of employment (including pay and pensions) or being subjected to a detriment (eg. selection for redundancy, denial of non-contractual benefits), where such treatment cannot be objectively justified. Less favourable treatment in relation to terms and conditions will be taken as objectively justified if the fixed term employee's overall package of terms and conditions is no less favourable than the overall package for comparable permanent employees. The draft Regulations also make clear that the right to equal treatment extends to opportunities to receive training or secure permanent employment and any qualifying periods for benefits. Employees will also have the right to be informed of available vacancies at his workplace (although posting on a public notice board or company intranet should suffice in most cases).

The draft Regulations give a fixed term employee the right to request a written statement within 21 days explaining the reasons for particular treatment and to complain to an employment tribunal in respect of infringements of the new rights under the Regulations or if he is unfairly dismissed or subjected to a detriment because he has sought to exercise his rights under the Regulations. Tribunals may make a declaration or recommendation, or award such compensation as is just and equitable (taking into account mitigation, but not including any element for injury to feelings).

With just over five months to go, employers should consider carrying out an audit of the terms on which they employ fixed term staff and how they differ (in terms of individual terms and overall package) from the terms of comparable permanent staff. Where fixed term employees' individual terms are less advantageous and the overall package is also lower, the employer needs to consider whether the differences can be objectively justified. If not, fixed term employees will need to be given the same terms as the permanent staff from July. In some cases, commercial considerations may mean that the employer will wish to reduce the terms offered to all employees – which will require careful consideration and employee consultation. Finally, employers should check their arrangements for advertising vacancies.

Successive fixed term contracts

The draft Regulations provide that, where an employer renews a fixed term contract and the employee has been working continuously for four years (or more) under a series of fixed term contracts, it will be deemed by law to be a permanent contract and the attempt to fix the term will be void – unless the employer can demonstrate an objective justification for continued fixed term employment. The four years of employment must be continuous and it may still be possible in some cases to break continuity by having short gaps of a week or more between each contract. It remains to be seen whether this practice could itself be seen as subjecting such employees to a detriment and therefore infringing the Regulations.

The four year limit can be varied by collective or workforce agreements (this is a new provision in the revised draft). The collective or workforce agreement can specify a maximum duration of successive fixed term contracts, a maximum number of contracts and/or objective reasons justifying renewals of fixed term contracts.

Employees who consider that their employment is to be regarded as permanent under these provisions will have the right to written confirmation of that or reasons why the contract continues to have effect as a fixed term contract. Employees can also seek a declaration from the tribunal. Continuous service prior to 10th July 2002 will not count towards the four-year period.

Employers therefore need to start considering whether they will need to negotiate a collective or workforce agreement to vary these provisions. If not, where they employ staff successively on fixed term contracts, when renewing fixed term contracts from 2006 onwards employers will need to check whether the employee has four years' continuous service and, if so, consider carefully whether a fixed term contract can still be justified.


The new draft Regulations make a number of amendments to primary legislation to remove discrimination in statutory rights between fixed term and permanent employees (eg. rights to receive guarantee payments, payments on the grounds of medical suspension, statutory sick pay). Contracts for a specific task will be treated in the same way as other fixed term contracts, so that the failure to renew such contracts will now be a "dismissal" (which could therefore be unfair). Employees on "task contracts" will be able to claim statutory redundancy payments, statutory minimum notice rights and the right to a written statement of reasons for dismissal. Fixed term employees on contracts of two or more years will no longer be able to waive their statutory right to a redundancy payment if made redundant at the end of their contracts (subject to transitional provisions).

The unions heavily criticised the previous draft Regulations for covering only employees and not "workers", thereby excluding many agency and casual workers. This accords with the letter of the EU Directive, which covers "workers who have an employment contract or employment relationship", but the unions argue that it is contrary to the spirit of the Directive. The revised draft Regulations are not altered in this respect and therefore will be subject to continued criticism from the unions on this point during the consultation period.

"© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us."

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