UK: Fixed-term Employees Entitled to Enhanced Redundancy Rights

Last Updated: 6 January 2006
Article by Christopher Booth

Contractual redundancy schemes often differentiate between permanent and fixed-term employees, in many cases excluding fixed-term employees from enhanced benefits. However, a recent employment tribunal decision suggests that this practice might be unlawful. If correct, this could have serious financial implications for public and private sector employers alike.


Since 2002, fixed-term employees have had the right not to be treated less favourably than comparable permanent employees because of their fixed-term status, unless the less favourable treatment can be objectively justified. However, there has been some doubt whether the law demands equal treatment in respect of enhanced redundancy rights. Some have argued that whereas permanent employees have an expectation of continued employment, fixed-term employees frequently do not. As a result, it may be justifiable - and therefore lawful - to exclude fixedterm employees from enhanced compensation if they are made redundant at the end of the fixed term.

This argument was put to the test by the four claimants in the Hart case, all of whom were senior advisers working under fixed-term contracts for the Department for Education and Skills. Fearing they were going to be made redundant, they were concerned that under Civil Service rules they would be entitled to modest compensation if they lost their jobs, whereas permanent colleagues would receive much larger sums. They therefore sought a declaration that this difference in treatment breached the 2002 Regulations.

The Decision

The Tribunal upheld the employees' claims. As a result, when their current contracts expire in 2006, the Department will have to make them substantial redundancy payments on a par with those payable to permanent employees - or offer to retain them under new contracts. Of particular interest is the finding that the difference in treatment could not be objectively justified. In relation to this it was significant that the employees (each of whom had worked under a succession of contracts for the Department) did, according to the Tribunal's findings, have a reasonable expectation of continued employment beyond the expiry of their current contracts, possibly even to retirement age.

Practical Implications

This case is a clear warning to all employers who provide less favourable redundancy terms to fixed-term employees to review their policy to see whether it can be objectively justified. This can be a difficult issue, particularly as the need to save costs is unlikely - by itself - to be sufficient. Legal advice on this issue is therefore recommended.

Stress claims: Recent case bucks the trend

Claims resulting from injury caused by workplace stress can be extremely expensive for employers. However, in recent years the courts have taken a fairly robust approach to such cases, particularly since the Court of Appeal's landmark decision in Sutherland v Hatton in 2002. That case laid down guidelines for employers to follow when dealing with stress at work. In particular, the Court stated that unless the employer was aware of any particular vulnerability it was ‘entitled to assume an employee could cope with the normal pressures of the job’ and it was not expected to be ‘clairvoyant’.

Following this case it has proved difficult for employees to succeed in stress claims. The recent case of Hone v Six Continents Retail is therefore interesting as it seems to buck this trend.

Excessive hours

The case concerned a pub manager who complained to his employer that he was working excessive hours and was tired. Although the employer genuinely did not believe the manager was working the hours he claimed and although it was not aware that the manager was suffering from headaches and taking painkillers, it was nonetheless held liable when the manager subsequently collapsed at work. The Court considered that the manager's injury was reasonably foreseeable.

Practical Implications

On these facts it might have been thought difficult for the employee to win his case. However, the decision seems also to have been influenced by the fact that the employee was working in excess of the maximum 48 hour week permitted by the Working Time Regulations. He had also refused to sign an agreement to work in excess of this limit. Clearly employers breach the Working Time Regulations at their peril.

Do You Need To Know…?

Rolled up holiday pay: an update

The vexed question of whether ‘rolled up’ holiday pay contravenes the Working Time Directive is to be determined by the European Court of Justice early next year. In the meantime the Advocate General has advised the Court that in her view rolled up rates can be lawful, provided they are transparent (ie the worker knows exactly what proportion of his hourly rate is holiday pay) and provided the worker's contract ‘ensures’ that the worker actually takes the minimum four weeks leave to which he is entitled under the Directive.

The ECJ is under no obligation to follow the Advocate General's opinion. However, if it does, it is hoped the Court will give much clearer guidance on how far employers will be expected to go in ensuring the take up of holiday entitlement, particularly with respect to casual or temporary staff.We will keep you informed of developments.

New laws take effect

Two important changes to the law took effect on 5 December 2005. Firstly, the rules on disability discrimination were amended in a number of respects. In particular, the definition of disability was extended so that more people with mental health problems are covered and certain conditions, including cancer, HIV and MS are covered from the point of diagnosis.

Secondly the Civil Partnership Act allows same sex couples to obtain legal recognition of their relationship by entering a ‘civil partnership’. This will result in civil partners being treated in the same way as spouses and therefore requires a number of changes to employment law. For example, rights to paternity leave and pay will be extended to civil partners, as will the right to request flexible working.

Christmas parties: a cautionary tale

The Court of Appeal has confirmed that a promise made by a manager at a Christmas party can be legally binding, provided the words used are sufficiently precise. Although on the particular facts of the case the Court held that discussion of a pay rise between an employee and his line manager was too vague to constitute a contractual obligation, the general principle remains. Managers should therefore tread carefully at these events… On that salutary note we wish you all the best for the festive season!

Cases referred to in this update:

Hatton v Sutherland [2002] ICR 613; Hone v Six Continents Retail Limited [2005] EWCA Civ 922; Hart v SOS for Education and Skills 2304973/04; Opinion of Advocate General Stix-Hackl, 27 October 2005; Judge v Crown Leisure ltd [2005] IRLR 823.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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