UK: Fixed-term Employees Entitled to Enhanced Redundancy Rights

Contractual redundancy schemes often differentiate between permanent and fixed-term employees, in many cases excluding fixed-term employees from enhanced benefits. However, a recent employment tribunal decision suggests that this practice might be unlawful. If correct, this could have serious financial implications for public and private sector employers alike.

Background

Since 2002, fixed-term employees have had the right not to be treated less favourably than comparable permanent employees because of their fixed-term status, unless the less favourable treatment can be objectively justified. However, there has been some doubt whether the law demands equal treatment in respect of enhanced redundancy rights. Some have argued that whereas permanent employees have an expectation of continued employment, fixed-term employees frequently do not. As a result, it may be justifiable - and therefore lawful - to exclude fixedterm employees from enhanced compensation if they are made redundant at the end of the fixed term.

This argument was put to the test by the four claimants in the Hart case, all of whom were senior advisers working under fixed-term contracts for the Department for Education and Skills. Fearing they were going to be made redundant, they were concerned that under Civil Service rules they would be entitled to modest compensation if they lost their jobs, whereas permanent colleagues would receive much larger sums. They therefore sought a declaration that this difference in treatment breached the 2002 Regulations.

The Tribunal upheld the employees' claims. As a result, when their current contracts expire in 2006, the Department will have to make them substantial redundancy payments on a par with those payable to permanent employees - or offer to retain them under new contracts. Of particular interest is the finding that the difference in treatment could not be objectively justified. In relation to this it was significant that the employees (each of whom had worked under a succession of contracts for the Department) did, according to the Tribunal's findings, have a reasonable expectation of continued employment beyond the expiry of their current contracts, possibly even to retirement age.

This case is a clear warning to all employers who provide less favourable redundancy terms to fixed-term employees to review their policy to see whether it can be objectively justified. This can be a difficult issue, particularly as the need to save costs is unlikely - by itself - to be sufficient. Legal advice on this issue is therefore recommended.

Claims resulting from injury caused by workplace stress can be extremely expensive for employers. However, in recent years the courts have taken a fairly robust approach to such cases, particularly since the Court of Appeal's landmark decision in Sutherland v Hatton in 2002. That case laid down guidelines for employers to follow when dealing with stress at work. In particular, the Court stated that unless the employer was aware of any particular vulnerability it was ‘entitled to assume an employee could cope with the normal pressures of the job’ and it was not expected to be ‘clairvoyant’.

Following this case it has proved difficult for employees to succeed in stress claims. The recent case of Hone v Six Continents Retail is therefore interesting as it seems to buck this trend.

The case concerned a pub manager who complained to his employer that he was working excessive hours and was tired. Although the employer genuinely did not believe the manager was working the hours he claimed and although it was not aware that the manager was suffering from headaches and taking painkillers, it was nonetheless held liable when the manager subsequently collapsed at work. The Court considered that the manager's injury was reasonably foreseeable.

On these facts it might have been thought difficult for the employee to win his case. However, the decision seems also to have been influenced by the fact that the employee was working in excess of the maximum 48 hour week permitted by the Working Time Regulations. He had also refused to sign an agreement to work in excess of this limit. Clearly employers breach the Working Time Regulations at their peril.