Don’t risk unfair dismissal when fixed-term contracts expire

12 Feb 2018 By Simon Fennell

When an employee’s contract ends, is their employer obliged to find them another job? Simon Fennell reports in the light of a recent EAT ruling

In Royal Surrey County NHS Foundation Trust v M Drzymala, the Employment Appeal Tribunal (EAT) examined whether a tribunal was right – when looking at the expiry of a fixed-term contract – to impose an obligation on the respondent to consider alternative employment as part of the fairness test under section 98(4) of the Employment Rights Act 1996.

Under section 95(1)(b) of the Employment Rights Act, the expiry and non-renewal of a fixed-term contract is deemed to be a dismissal. Typically, employers rely on ‘some other substantial reason’ under section 98(2) to defend claims arising from any such dismissals.

The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 impose an obligation on the employer to make all employees who are on fixed-term contracts aware of any permanent vacancies that exist within their organisation.

Here, the EAT had to consider whether compliance with all material aspects of the regulations was sufficient to render the dismissal as fair.

The claimant was employed by the respondent as a locum consultant under a series of fixed-term contracts between November 2011 and September 2014. The claimant’s application for a permanent consultant position was rejected. During a discussion in which the claimant was notified that she had been unsuccessful, the respondent mentioned that there might be other substantive roles available. 

The claimant was later issued with three months’ notice confirming that her fixed-term contract would not be renewed. The claimant was given no right of appeal and no further mention was made of any alternative positions. The respondent eventually heard an appeal in November 2014 following a grievance, concluding that an appeal would have made no difference.

The claimant submitted a claim for age discrimination (which she lost and did not appeal) and unfair dismissal. She complained that the respondent had not complied with its obligations to dismiss fairly in accordance with section 98(4) of the Employment Rights Act, and specifically complained that the respondent had not properly explored the options available for alternative employment.

The employment tribunal upheld her complaint and found that the dismissal was unfair under section 98(4). Specifically, the tribunal stated that having mentioned the possibility of alternative employment, the respondent was obliged to see those discussions through to their conclusion. The tribunal was not persuaded that full compliance with the regulations was enough to satisfy section 98(4) and the absence of any meaningful appeal resulted in the respondent having failed to act fairly “in all the circumstances”.

The respondent appealed under a number of grounds including the arguments that: i) by providing access to the current vacancies, the respondent had complied with the regulations; and ii) that the tribunal had misdirected itself through the application of previous authority that the respondent submitted was only relevant to redundancies.

The EAT made relatively short work of dismissing each ground of appeal and upheld the original decision. The EAT was keen to stress that the obligations imposed by the regulations are in addition to the obligations of fairness imposed by the Employment Rights Act. Whether an employee is treated fairly in any particular case is always a question of fact to be determined by the tribunal. 

The tests applicable for the dismissal of a fixed-term employee with more than two years’ service will be the same as those for a permanent employee. The consideration of alternative employment may not always be required, but an employer that fails to consider such options will significantly increase the risks of an unfair dismissal.

Simon Fennell is a senior associate in Shoosmiths’ national employment team

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