14. Fixed term contracts

The Appeal Court has made it clear that the termination of an employment relationship at the end of a genuine fixed-term contract is not a dismissal, so it follows that it cannot be unjustified.

But what is a fixed-term contract? A fixed-term contract, sometimes less specifically called a 'temporary contract', is one which provides for a fixed or set term of employment determined either by the expiry of a period of time or by the completion of a certain task. Such contracts have been used for a variety of purposes, such as seasonal work or the filling of a position on a temporary basis. In strict contractual terms, when the period of a fixed term comes to an end, it means the employment contract terminates.

The crucial part of fixed-term contracts, however, is establishing whether the reason for the fixed term has a genuine commercial need or not. In some cases it is easy to establish that the task to be performed has a clear and definite end point, such as for example, employing someone to carry out a stock-take. When the counting of stock is completed, the contract terminates. Or the employer may wish to ensure that the work is carried out in a set time period to prevent the job being dragged out. In such cases, there is clearly a genuine commercial reason for the period being a fixed one.

In other cases, however where there is no definite reason for the contract being for a fixed period and it is simply described as such for other reasons, employer’s may expect trouble. When, for example, the parties intend the employment relationship to be ongoing or where there has been an express or implied promises to renew it, the contract is not likely to be seen as being one of a fixed term.

An employer can treat an employee's employment as being at an end of the expiry of a fixed term provided:

• there is no previous or subsequent variation to the agreement;
• the fixed term contract was fairly negotiated and does not conceal the true intentions of the parties;
• the contract is not being used to deny the employee of any legal rights;
• there is no express or implied assurance by the employer that the contract will be renewed;
• the employee has no legitimate expectation that the contract will be renewed; and
• the contract has not been allowed to overrun the end of the fixed period.

Otherwise the failure or refusal to renew a 'fixed-term' contract may amount to an unjustified dismissal, which could lead to the employer being ordered to reinstate the employee or to pay compensation.