Changes to Employers’ Fixed Term Contracts Obligations Following Important Judgment

by Liam Riordan, partner in the Employment Law and Benefits Team at Mason Hayes & Curran

A recent case before the High Court involved the Board of Management of Malahide Community School and a teacher. The teacher brought a claim for unfair dismissal against the school following the expiry of a fixed term contract without it being renewed.

The four significant aspects of Mr Justice Garrett Simon’s judgment are:

• A fixed term contract did not exist in the first place
• That prior informed consent is required for fixed term contracts
• That section 2(2)(b) of the Unfair Dismissals Act 1997 (the Act), is a waiver and not an exclusion, and
• That this waiver only applies at the commencement of an employment contract

We highlight the aspects of the judgment that employers need to be aware of.

No fixed term contract where contingencies are present

The fixed term contract contained two contingencies relating to its possible renewal; these related to hours and to satisfactory service.

Judge Simons held that by its nature a renewable contract was not certain and consequently could not be categorised as a fixed term contract.

This decision introduces the possibility that employees currently employed on fixed term contracts containing contingencies as to their possible renewal  will claim that they were not in fact on fixed term contracts. They may also claim that their dismissal arising from the termination of the term of the contract is an unfair dismissal.

Informed consent is required for a waiver

Judge Simons held that a person cannot waive their rights if they have not been adequately advised and made an informed decision to do so. In this case the employee had acquired permanent status having been employed by the school, without a written contract, for two years prior to accepting a fixed term contract. Judge Simons was concerned that the employee in this case would lose her acquired right to permanence on signing the fixed term contract. This is a major change which has implications for the public sector. Fixed term contracts are used extensively in the public sector to avoid making permanent appointments. There is now a question mark over any fixed term contract containing contingent terms about its possible renewal as to whether it is a fixed term contract at all and/or whether the employee concerned might have acquired rights to permanence.

It is important for employers to ensure that any existing employees who enter into a fixed term contract obtain independent advice before signing their contract to this effect. Decisions of both the High Court and the Labour Court have previously held that legal or union advice, depending on the nature of the contract, is sufficient and fulfils the independent legal advice requirement.

Waiver exists at the commencement of a contract

Judge Simons re-classified section 2(2)(b) of the Act as a waiver and not an exclusion.

The timing of a waiver is of crucial importance. Judge Simons held that for a waiver to be valid, prior informed consent must be obtained in advance. He emphasised that it applied “at the commencement of employment”. A waiver cannot be retrospective.

Conclusion

This decision applies only when an existing employee is offered and accepts a new fixed term contract by their employer. Such a scenario is more likely to occur in the public than in the private sector.

A positive outcome of this decision for employers is that this judgment will reduce their risk. Once an employee has obtained informed consent and signed their fixed term contract, the employer will no longer be vulnerable to claims of abuse of section 13 of the Act.

We advise employers to ensure that existing full and part-time staff starting new fixed term contracts obtain independent advice before signing the contract.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

About the author
Liam is a partner in the Employment Law and Benefits Team and practices in the area of education law. He has extensive experience as an education lawyer in advising educational institutions at first, second and third level on the wide range of issues that arise from the day-to-day interaction of teachers, students, parents and management.
He has advised and represented clients in relation to the operation of disciplinary procedures and grievance procedures. He has also advised on the investigation of complaints including bullying/harassment complaints as well as on dealing with statutory bodies such as the HSE/Child and Family Agency and the Ombudsman for Children, amongst others.
Liam has represented Boards of Management at the Employment Appeals Tribunal, the Labour Relations Commission and the Equality Tribunal (all now subsumed in the Workplace Relations Commission), the Labour Court as well as in the civil courts up to and including the Supreme Court. Liam works closely with the relevant management bodies representing management in the education sector.