Procedures for Handling the Expiry of Fixed Term Contracts

Friday, March 14, 2014

In law, when a fixed-term contract expires and is not renewed, or is renewed as a further fixed-term contract, the employer must inform the employee in writing, on or before the date of renewal, of the objective reasons justifying the renewal and the reason that a permanent contract or contract of indefinite duration is not being offered.

It is clear from case law that the employer may not retrospectively justify a decision to renew a fixed-term contract, and that it must outline, in writing to the employee, the reasons that the contract is being renewed or extended at that time. 

The reasons for renewal or extension of the fixed-term contract should not be related to the employee’s fixed-term status. They should be related to a real business need. 

For example, the company requires specialist expertise, not already in the company, for a period of time; to cover staff absence such as maternity leave, sick leave, a secondment or a career break; where it is related to a specific business opportunity or project but the future is unclear; or in the case of many organisations in the not-for-profit sector, where funding is year-by-year and uncertain, which is increasingly the case in this sector. 

Limits on Renewal 
There are limits on the duration of successive fixed-term contracts. Where a fixed-term employee is employed on two or more fixed-term contracts, the duration cannot exceed four years. If they are, it will be deemed to be a contract of indefinite duration. 

However, under section 9(4) of the Protection of Employees (Fixed-Term Work) Act, 2003, an employer may renew a fixed-term contract beyond the four-year limit where it can show there are objective grounds for doing so. Obviously, this could be difficult to demonstrate. 

The Public Sector Moratorium 
Section 13(1)(d) of the Act prohibits an employer from dismissing a fixed-term employee where the reason for doing so is for the purpose of avoiding his/her fixed-term contract becoming one of indefinite duration. 

However, the moratorium on recruitment into the public sector is still in place. Thus what do employers in the Public Sector do about fixed-term employees whose contract duration is approaching four years in duration? 

In recent cases – Health Research Board v Vivion McGuire (October 2010) and Teagasc v SIPTU and IMPACT (June 2009) – the Labour Court did not accept the Moratorium as a defence.