With the economic situation looking uncertain, we asked Alana Jones of Jones Cassidy Jones solicitors to review some of the issues surrounding redundancies and employees on fixed term contracts.

Why consider Fixed Term Contracts?
In the current economic gloom we are constantly warned of the prospect of a very slow recovery, the need for belt-tightening and impending public spending cuts. Does recruiting on fixed term contracts provide a sound risk prevention strategy to employers mindful of the potential need for future redundancies? Would this avoid exposing the rest of the workforce to the risk of redundancy if the new jobs cannot be sustained? If the fixed term contracts are for less than one year’s duration, will the employer avoid the risk of tribunal claims if the fixed term employees are selected for any required redundancies?

Unfair Dismissal and the Statutory Uplift
The general rule (subject to a number of exceptions), is that in order to qualify for the right to claim unfair dismissal, an employee must have completed at least one year’s employment. In order to qualify for the right to receive a statutory redundancy payment, an employee must have completed at least two year’s continuous service. These qualifying rules, contained within the Employment Rights (Northern Ireland) Order 1996 (“the 1996 Order”), suggest that an employer may gain significant protection from using fixed term employment contracts.

However, other statutory positions need to be taken into account. The 1996 Order also provides, at Article 127, that an employee is to be regarded as having been dismissed if employed under a limited term contract which terminates by virtue of the “limiting event” occurring without the contract being renewed. The expiry of a fixed term is the occurrence of such a limiting event. So, if an employee is engaged under a fixed term contract for 18 months and the employer lets the contract end at the conclusion of that period in order to avoid the need for or reduce the number of compulsory redundancies, the end of the contract will amount to a dismissal. The dismissal will occur without the need for the employer to serve notice of the dismissal but if the employer fails to complete the statutory dismissal procedure, the dismissal will be rendered automatically unfair and any compensation awarded will be subject to 10-50% uplift.

Less Favourable Treatment
The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations (Northern Ireland) 2002 (“the Regulations”) also confer significant protections on fixed term employees. Regulation 3 provides that a fixed term employee has the right not to be treated less favourably on the ground of his/her fixed term status than a comparable permanent employee, unless the treatment is justified on objective grounds. A comparable employee must be engaged in the same or similar work having regard, where relevant, to whether the employees have a similar level of qualification or skills.

Suppose an employer has 7 administrators, 2 of whom are engaged on fixed term contracts of 11 months’ duration. The employer may select the fixed term employees for redundancy in order to protect the continued employment of longer serving employees and to avoid the risk of unfair dismissal claims. However, even though the fixed term employees may lack sufficient length of service to claim unfair dismissal, they can pursue claims of less favourable treatment under the Regulations. Seeking to protect permanent employees at the expense of the fixed term employees should not, in my view, be regarded as amounting to objective justification; nor should the aim of avoiding unfair dismissal claims.

Redundancy
An employer can select fixed term employees for redundancy on the basis of fixed term status if the employer can show that this is objectively justified. At present there is a lack of case law authority to provide sound guidance on the circumstances in which such a selection may be regarded as objectively justified.

DEL’s (The Department for Employment and Learning) guidance states: “… where fixed term employees have been brought in specifically to complete particular tasks or to cover for a peak in demand, it is likely that an employer could objectively justify selecting them for redundancy at the end of their contract.”

(If an employer is contemplating selecting fixed term employees for redundancy in preference to permanent employees, it would also be prudent to consider the composition of the workforce. In the case of Whiffen –v- Milham Ford Girls’ School [2001] IRLR 468 it was held that an employer had failed to justify a sexually discriminatory redundancy policy under which employees on fixed term contracts were automatically selected for redundancy before employees in permanent contracts).
If a claim of less favourable treatment succeeds, the employer is liable to be ordered to pay such compensation as a Tribunal considers just and equitable having regarding to the infringement of the Regulations and any loss attributable to that infringement including any reasonable expenses incurred by the Claimant.

Conclusion
In conclusion, my view is that the wholesale use of fixed term contracts offers little protection to an employer wishing to guard against the litigation risks associated with compulsory redundancies.

This article has focused solely on the viability of using fixed term contracts as a risk prevention strategy where redundancies are anticipated. For general guidance on the Regulations, DEL’s publication “Fixed Term Work: A Guide to the Regulations” is recommended.
http://bit.ly/b7eRHI