Triona Cody

Managing risk and avoiding legal claims is an important part of the role of HR professionals in the workplace.

In this article, we explore the key legal obligations surrounding fixed-term contracts, including limits on renewals, the requirement for objective justification, WRC and Labour Court decisions, and how employers can avoid common pitfalls.

The law

A fixed-term contract of employment is determined by an objective condition such as arriving at a specific date, completing a specific task or the occurrence of a specific event.

The Protection of Employees (Fixed-Term Work) Act 2003 provides that if a fixed-term employee is employed on two or more fixed-term contracts and the aggregate duration of these contracts exceed four years then a contract of indefinite duration is created by operation of law.

A contract of indefinite duration is a contract that has a fixed-term/specified purpose deleted from the contract but in all other respects the contract of indefinite duration will contain the same terms and conditions as the original fixed-term contract on which the employee was employed.

The four-year rule referred to above does not apply if there is a renewal of a contract of employment for a fixed-term where there are objective grounds justifying such a renewal.

Objective grounds

The objective grounds must be for the purposes of achieving a legitimate aim of the employer and such treatment is appropriate and necessary for that purpose.

The grounds on which an employer relies to justify the renewal of a fixed-term contract and failure to offer a contract of indefinite duration cannot include the status of the employee as a fixed-term employee.

If an employee has been employed on a fixed-term contract(s) for four years to complete a project for their employer and a short extension beyond the four-year period is required to complete the project, it is likely that it would be objectively justifiable to offer to extend the contract on a fixed-term basis.

Equal treatment

Fixed-term employees are entitled not to be treated less favourably than comparable permanent employees in relation to terms and conditions of employment, access to training, information on vacancies etc. Employers must not discriminate against employees on the basis of their fixed-term status.

Contract renewals

The employee must be informed in writing as to the objective grounds justifying the renewal of the fixed-term contract and why a contract of indefinite duration is not being offered at the latest by the date of renewal.

A probationary period for the same role an employee held under their previous fixed-term contract should not be included in the fixed-term contract which issues to the employee with the renewal letter.

Contract termination

Employers should ensure to have written fixed-term contracts in place which includes clauses providing for summary dismissal and excluding the operation of the unfair dismissals legislation. Otherwise, there is a risk of an unfair dismissal claim on the termination of the contract.

In addition, employers should ensure to include a clause providing for termination of the fixed-term contract on notice. Failure to do so where there is early termination of the contract could result in the employee concerned bringing a successful claim to be paid the unexpired portion of the fixed-term.

Recent decisions

Most of the case law in Ireland in respect of the Act concerns public sector employees who are seeking to establish their right to a contract of indefinite duration rather than claims that they were discriminated against on the basis of their fixed-term status.

(a) Acting up arrangements may constitute fixed-term contracts

In Maurice Power v Health Service Executive [2022] IESC 17, the Supreme Court accepted that the Act extends to permanent employees who are appointed to more senior posts on a fixed-term basis.

The Workplace Relations Commission in John Purcell v Kerry County Council ADJ-00048904 found that an employee in an acting up position for a substantial number of years should be issued with a contract of indefinite duration.

(b) Termination of fixed-term employment may constitute unfair dismissal

In A Worker v A Health Service Provider ADJ-00037789 the fixed-term contract omitted the waiver wording necessary to disapply the unfair dismissals legislation. The employee, who had over 12 months’ service, succeeded in their unfair dismissal complaint to the Workplace Relations Commission.

(c) Different treatment is not necessarily less favourable treatment

In Kerry County Council v Cora Carrigg FTD192 the Labour Court held that the employee was treated differently but no less favourably than a comparable permanent employee when the terms of their contract were considered as a whole. The employee was not at any financial or other disadvantage versus a comparable permanent employee as a result of their different treatment by the employer throughout their employment.

(d) Fair procedures apply to fixed-term employees

The Workplace Relations Commission in Luarena Toland v St Vincent’s University Hospital ADJ-00053658 found that the employer did not utilise the available mechanisms to terminate the employee’s fixed-term contract and did not apply the principles of fair procedures in demoting the employee from their acting up position/returning them to their substantive post. A fixed-term employee does not lose their right to fair procedures because of the fixed-term nature of their contract.

What steps can HR take to minimise the risk of legal claims arising from fixed-term contracts?

1. Ensure the fixed-term contract is in writing and is signed by both parties.
2. Specify the start and end dates of the employment in the contract and detail the objective condition that will bring the contract to an end.
3. Expressly provide in the contract that the unfair dismissals legislation will not apply to a dismissal consisting only of the expiry of the fixed-term or specified purpose.
4. Include a clause in the contract for summary dismissal and a clause providing for termination on notice.
5. Ensure that fixed-term employees are not treated less favourably than comparable permanent employees by reason of their fixed-term status.
6. Document the objective grounds justifying the renewal of a fixed-term contract and inform the employee in writing of these objective grounds no later than the date of renewal.
7. Ensure not to include a probationary period in a successive fixed-term contract to an employee for the same role they held in the preceding fixed term contract.
8. Monitor the duration of consecutive fixed-term contracts to avoid unintentionally creating a contract of indefinite duration.

• Triona Cody is a partner in Kane Tuohy’s employment and litigation department.