Guidance on your employment rights: non-renewal of fixed term contracts

The expiry and non-renewal of a fixed-term contract is regarded in law as a dismissal.

If a contract isn’t renewed this is considered to be a dismissal, and if the employee has 2 years’ service the employer needs to show that there’s a ‘fair’ reason for not renewing the contract (eg. if they were planning to stop doing the work the contract was for).

Workers have the right:

  • not to be unfairly dismissed after 2 years’ service – for employees who were in employment before 6 April 2012, it’s 1 year’s service
  • to a written statement of reasons for not renewing the contract – after 1 year’s service

They may be entitled to statutory redundancy payments after 2 years’ service if the reason for non-renewal is redundancy.

This means that any employee working under a fixed-term contract who has two or more years of continuous service is eligible to bring a claim for unfair dismissal where the contract runs out at the end of the term and is not renewed.

Grounds for unfair dismissal

The employer must ensure that the dismissal is fair. Consequently, despite the fixed-term contract stating at the outset that the contract will terminate on a specific date, if the reason for dismissal is unfair, or if an employer does not serve the correct notice to the fixed-term employee, or fails to follow any part of the procedure correctly, they are liable to a claim for unfair dismissal.

The fact that the fixed term has expired is unlikely to amount to a fair reason for dismissal by itself.

Note too that under the statutory (and QMUL) dismissal and grievance procedures, where a fixed-term employee is dismissed (where they have more than 12 months’ service), it will be an automatically unfair dismissal if the statutory dismissal procedure is not followed in terminating the contract.  It is possible that the expiry of a fixed-term contract could assist an employer in arguing that there was “some other substantial reason” for dismissal, but this is unlikely always to be successful. Like permanent employees, fixed-term employees will also be entitled to statutory redundancy payments if their position is made redundant and they have more than two years’ service.

Redeployment

Fixed-term employees should also be notified about any permanent positions which become available which they are suitably qualified to do.  Employers are obliged to seek to identify whether there is any alternative work available within the company which the employee could reasonably be offered. If suitable alternative work is available, and if this work is not offered to the employee prior to the expiry of the fixed-term contract, then this could render the employee’s dismissal unfair even if the statutory dismissal and disciplinary procedures have been followed.

Key Points to Remember:

  • The expiry of a fixed-term contract is regarded in UK law as a dismissal.
  • HR/Your Dept have to demonstrate the reason for the dismissal (usually redundancy).
  • HR have to take appropriate steps to ensure that the dismissal is fair in all the circumstances.
  • HR cannot allow a fixed-term contract to expire without renewal and then engage someone else to do the same work.
  • You may be entitled to statutory redundancy pay.
  • You should be informed of any permanent vacancies.
  • HR have to give you written notice in accordance with the provisions of the Employment Rights Act 1996, if ending the contract early under an early termination clause.
  • All employees with the requisite service can request a written statement of reasons for dismissal.

Sources:

https://www.hrlaw.co.uk/site/infobank/infobankarticle/fixed_term_employees_permanent_problem.html
https://www.burnetts.co.uk/publications/blogs/fixed-term-contracts-what-are-workers-rights

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