By Michelle O’Riordan, Solicitor, Employment and Pensions Unit
The economic climate has resulted in unprecedented fluctuations in business demand which has lead to an increase in the use of fixed-term contracts of employment. This has been accompanied by a steep rise in redundancies. This article looks primarily at the issues which arise when making fixed-term employees redundant.
What legal protections are afforded to fixed-term employees?
The Protection of Employees (Fixed-Term Work) Act, 2003 (“the Act”) provides, amongst other things, that a fixed-term employee cannot be treated less favourably in respect of his conditions of employment relative to a comparable permanent employee of the same employer unless there is an objective justification for doing so. This applies to all terms and conditions of employment including pay, sick pay, overtime, holidays and redundancy schemes. In practice it can be difficult to justify less favourable treatment on the grounds of objective justification.
Employees may refer disputes regarding their entitlements under the Act to a Rights Commissioner for adjudication. The decision of the Rights Commissioner may be appealed to the Labour Court for a legally binding decision.
What does an employer do if he needs to make a fixed-term employee redundant?
A fixed-term employee can be made redundant on the expiry and non-renewal of his
fixed-term contract if the circumstances giving rise to same fall within the definition of “Redundancy” in the Redundancy Payment Acts 1967 to 2003 (“the Redundancy Acts”). Redundancy is defined in the Redundancy Acts by reference to five grounds, which are summarised as follows:-
- Cessation of Business;
- No further or less requirement for work of the particular kind performed by the employee in that place;
- Work to be performed by other employees or otherwise;
- Work to be performed in a manner for which the employee is not qualified or trained;
- Work to be performed by an employee who is capable of doing other work which the employee is not qualified to do.
If the expiry of the fixed-term contract is due to one of the above grounds and that employee has the requisite two years service under the Redundancy Acts and is in insurable employment for taxation purposes, the fixed-term employee is entitled to a statutory redundancy payment. Such an employee may also be entitled to an ex-gratia payment if comparable permanent employees employed by that employer are entitled to same. Due to the provisions of the Act outlined above, parity of redundancy payments is required save for where different treatment can be objectively justified.
Employees cannot be selected for redundancy simply because they are employed on a
fixed-term basis. Normal redundancy and fair procedures apply i.e. identification of a pool of employees (which may include permanent employees) from which employees are selected for redundancy, application of selection criteria to the employees in the pool and consideration of alternative employment for said employees.
Employees unfairly selected for redundancy may take a claim under the Unfair Dismissals Acts 1977-2007. While many fixed-term contracts seek to exclude the application of the Unfair Dismissals Acts on termination of a fixed-term contract at the expiry of the term, where an employee’s position is being made redundant notwithstanding that their contract is at an end, it would be open to the employee to argue that the reason for their dismissal is redundancy and not the expiry of their contract and therefore argue that the Unfair Dismissals Acts do apply.
While fixed-term contracts are a vital instrument for employers to manage business needs in the current economic uncertainty, their use is becoming ever more complex with employers at risk of facing costly litigation by failing to observe the rules regarding their operation. It is critical that employers have procedures in place in respect of the administration of such contracts.
For further information on fixed-term contracts contact our Employment and Pensions Unit.
Protection of Employees (Fixed-Term Work) Act, 2003 provides for the principle of no less favourable treatment between fixed-term employees and comparable permanent employees of the same employer.
Fixed-Term employees are entitled to redundancy payments provided they are in insurable employment, are being made redundant within the meaning of the Redundancy Acts and have the requisite two years service under the Redundancy Acts.