United Kingdom Employment Appeal Tribunal

APPEARANCES

 

 

For the Appellant	Mrs F Sasan, Solicitor Of- Messrs Grant Brown Lindsay Solicitors 180 West Regent Street GLASGOW G2 4RW
For the Respondent	Mr D Morgan, Solicitor Of- Messrs Burness Solicitors 242 West George Street GLASGOW G2 2QY

SUMMARY
FIXED TERM REGULATIONS

Held allowing appeal that an employee is subject to a fixed term contract within the 2002 Regulations even if the contract may be terminated before the expiry date by notice by either party.


 


HIS HONOUR JUDGE McMULLEN QC:

1. This case is about the definition of a fixed-term employee in the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 ("The Regulations") and their application to a particular contract of employment. The judgment represents the views of all three members. We will refer to the parties as Applicant and Respondent.

Introduction

2. It is an appeal by the Applicant in those proceedings against a decision on a preliminary point of jurisdiction of an Employment Tribunal sitting at Glasgow, Chairman, Mr W A Muir, registered with extended reasons on 16 September 2003. The Applicant was represented there by a solicitor, and, today Mrs Sasan of the same firm and the Respondent was represented there and here by Mr Morgan.
3. The Applicant claimed unlawful discrimination contrary to the Regulations. The Respondent disputed the claim on the merits but ultimately contended that the Regulations did not apply to this contract of employment and set up a preliminary hearing by agreement.

The Issue

4. The essential issue, as defined by the Employment Tribunal, was to decide if the Regulations applied to the Applicant's contract. It decided they did not. The Applicant appeals. Directions sending this appeal to a full hearing were given in Chambers by the Honourable Lord Johnston.

The Legislation

5. The relevant provisions of the Regulations are as follows:-

"4 Definitions

In the Regulations, the following terms are given the following meanings:-

"Fixed-Term Contract" Means a contract of employment that, under its provisions determining how it will terminate in the normal course, will terminate -

(a) on the expiry of a specific term,

(b) on the completion of a particular task, or

(c) on the occurrence or non-occurrence of any other specific event other than the attainment by the Employee of any normal and bona fide retiring age in the establishment for an employee holding the position held by him.

and any reference to "fixed-term" shall be construed accordingly;

"Fixed Term Employee" Means an employee who is employed under a fixed-term contract;

"Permanent Employee" Means an employee who is not employed under a fixed-term contract and any reference to "permanent employment" shall be construed accordingly."

6. Those Regulations apply in circumstances in which the principle of non-discrimination is created by Regulation 3(1):-

"1) A fixed-term employee has the right not to be treated by his employer less favourably than the employer treats a comparable permanent employee –

a) as regards the terms of his contract of employment; or

b) by being subjected to any detriment by an act, or deliberate failure to act, of his employer."

7. The Regulations derive from the Council Directive 99/704 EC of 29 June 1999. The Regulations, it is common ground in this case, transpose the definitions of the fixed-term worker although there is a slightly different definition since the Directive covers workers not simply employees. The terms are defined as follows:-

"Fixed-Term Worker" Means a person having an employment contract or relationship entered into directly between an employer and a worker where the end of the employment contract or relationship is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event.

"Comparable Permanent

Worker" Means a worker with an employment contract or

relationship of indefinite duration, in the same establishment, engaged in the same or similar work -occupation, due regard being given to qualifications/skills."

8. The principle of non-discrimination applies in the Directive and the preamble to the Directive sets out the policy of the European Union in bringing into effect the relevant protection. The purpose of the Directive which embodies an agreement of the social partners is set out as follows:-

"The purpose of this framework agreement is to-

(1) improve the quality of fixed-term work by ensuring the application of the principle of non-discrimination;

(2) establish a framework to prevent abuse arising from the use of successive fixed-term employment contracts or relationships."

9. Both parties invited us in one way or another to consider the Directive and so we do.
10. The Tribunal directed itself by reference to the Regulations and what was submitted to it as the leading authority (Dixon v BBC [1978] ICR 281). It did not regard itself as bound by that decision made under unfair dismissal law. That aspect and that authority are not relied on by the Applicant today and no submissions have been made to us.

The Facts

11. The facts must be tentatively stated for there has been no hearing. Looking, therefore, at the Originating Application and the Notice of Appearance in this case, the Applicant was engaged by the Respondent on 9 December 2002 and the relationship between them came to an end on 30 January 2003 with one week's notice. The contractual documentation supporting the Applicant's employment was signed on behalf of the company on 13 and on behalf of the Applicant on 20 January 2003, and, 10 days after his signing of this agreement, it was terminated.
12. The Applicant's complaint, as argued in his Originating Application, was that he had been dismissed without the opportunity being given to him, as he said he was entitled pursuant to the Company Handbook, to access a procedure available known as the Performance Improvement Procedure. He argued that had he been afforded the benefit of that procedure, it is probable that the Respondent would not have felt it necessary to terminate the contract.
13. The contract of employment, the Handbook and letter of appointment form the contractual documents. We have not been referred to the Handbook but it is argued in the Originating Application, without resistance, to include the following term:-

"The Performance Improvement Procedure is to ensure that employees are given every opportunity to make good shortfalls in performance and meet the required standards of work."

14. To this Originating Application the Respondent submitted a response, based upon the merits. In other words, the preliminary point which was heard by the Tribunal was not raised. The Respondent said this:-

"The Respondent is a large employer engaged in the financial services industry. The Applicant commenced employment with the Respondent on around 9December 2002 as a Project Manager, Insurance Services within the Respondent's Wealth Management Europe, Insurance Services Division.

While the Applicant was engaged to work on a specific project with clearly required deliverables for a fixed term duration from 9 December 2002 to 31 July 2003, his contract of employment expressly stated that either party may terminate the employment by giving one week's notice to the other. In terms of the contract of employment, the Applicant had no entitlement to receive written reasons for the termination of employment during this period.

The Applicant failed to meet the standard of competence required by the Respondent of an employee engaged in the role of Project Manager and, accordingly, the Applicant was dismissed in accordance with his contract of employment on around 30 January 2003. The Applicant was paid in lieu of his contractual one week notice of termination.

The Respondent denies that the Applicant has been less favourably treated or subjected to any unfavourable treatment when compared with a comparable permanent employee. The Applicant's status as a fixed term employee had no bearing upon any decision taken in connection with his employment. Any comparable permanent employee with the same length of service would have been dismissed in similar circumstances as the Applicant The Respondent denies that the Applicant's engagement as a fixed term employee had any bearing upon its decision not to implement the PIP and to dismiss in all the circumstances.

In the alternative, if the Applicant was subjected to less favourable treatment, which is denied, the Respondent nonetheless contends that this was objectively justified when compared with a comparable permanent employee, taking into account the Applicant's remuneration and benefits package as a whole. As a fixed term employee, the Applicant was paid at a premium rate over comparable permanent Project Managers."

15. Thus, if the Applicant had survived the preliminary hearing, there would be a hearing on whether or not he was treated less favourably by the Respondent when it him on 30 January 2003.

The Contractual Provisions

16. The Contract of Employment to which we have referred took effect from 9 December 2002 although it was not signed for a further 6 weeks. It is a statement of terms and conditions of employment issued pursuant to the Employment Rights Act 1996 and the Employment Act 2002. It is the Respondent's duty to produce such a statement and this is what it did, as at that date, although not required at the start of the employment to put forward such a statement, this employer plainly took its responsibility under the legislation seriously.
17. The Contract of Employment has the following relevant clauses:-

"1 Job Title

The employment is for a fixed term from 9 December2002 to 31 July 2003 and you are employed as a Project Manager Insurance Services in the first instance Your grade is Grade 9. You also accept that you may be required to perform another role or other duties or tasks beyond the scope of your normal duties.

3.1 Rate of Pay: £52,000 per annum

6 Holidays

The holiday year runs from 1st March to the last day of February each year.

You are entitled to 30 days paid annual leave in each completed year.

For the period of your temporary contract you are therefore entitled to a total of 18 days.

Further details of annual leave entitlement are to be found in the Employee Handbook.

8 Notice

During the first six months of continuous service, either party may terminate the employment by giving one week's notice to the other. You are not entitled to receive written reasons for the termination during this period.

After the first six months of continuous service has been completed satisfactorily the following periods of prior written notice are required to be given to terminate the employment."

18. The Applicant, in his grade, was entitled to 3 month's notice, had he survived beyond 9 June 2003, six months after the date of his starting. Other aspects of the Contract of Employment have not been argued before us and so we say nothing more of them.
19. Completing the trilogy of the contractual documents was a letter of appointment which the Applicant was sent on 13 January 2003. It is accepted that there was some slippage in the requirement of the Applicant to fill in a contract, but as soon as this document was put before him, he was prepared to sign it. This is sent from a part of the organisation known as "People and Culture" and it says as follows:-

"I am pleased to offer you a fixed-term position with National Australia Group (Europe) Limited, based at Wealth Management Europe, Insurance Services and reporting to Gillian Forrest. I enclose with this letter a statement detailing the principal terms and conditions of employment which together with NAG's Employee Handbook comprises the terms of this offer of employment."

20. The offer was subject to receipt of references deemed by the Respondent to be satisfactory, a satisfactory medical questionnaire and proof of the Applicant's qualifications.

The issue on appeal

21. The essential issue for the Employment Tribunal to decide, was, whether what is accepted as a fixed-term contract pursuant to Clause 1, changed by reference to the inclusion of Clause 8. In other words, did Clause 8 take this contract out of the protection given by the the Regulations. The Tribunal recognised that it was faced with an exercise in pure construction, first, of the Regulations, and, then, applying those Regulations to the construction of the contractual documents in this case. It decided, having heard argument that the Applicant was outside the definition because of the introduction of a right in the employer in Clause 8, and, indeed, in the employee, to terminate without reasons prior to the otherwise fixed date.

The submissions

22. On behalf of the Applicant, it is submitted that the contract is a fixed-term contract, notwithstanding the existence of a right of earlier determination in Clause 8. The contract would determine, in its normal course of events on 31 July 2003, almost 8 months after the Applicant began working there. Save for certain events which could be regarded as exceptional such as frustration, repudiation, material breach or ill health, the contract would "normally" go on to the end of July 2003. The Applicant, on Mrs Sasan's argument was within the protection.
23. On behalf of the Respondent, Mr Morgan contended that it must be open to an employer to terminate a contract which is not working well. He pointed out a number of difficulties which will occur to employers if their contracts are held to be fixed-term contracts without the right of earlier termination. Parliament's intention in drafting the Regulations was to amend the Directive and as a matter of construction the Directive would make it more difficult for the Applicant to succeed.
24. It was submitted that Clause 8 introduces something akin to a probationary period. Mr Morgan submitted there was a three-fold test.

(1) Is there a contract of employment that is conceded?

(2) What other provisions identify how the contract will terminate? In this case those provisions are found in Clauses 1and 8 and read together it cannot be said that termination is in the normal course on the occurrence of a specified event or date.

(3) Will the contract terminate on any of the three events specified in the Regulations? Here, the uncertainty cannot be resolved because there is a subjective, not an objective, ingredient; that is, the will of either party to terminate on one week's notice without reasons.

25. It is accepted by Mr Morgan that although the Tribunal has made what appear to be findings, given that this is an exercise in construction, the question is: what is the true construction of the Regulation and of the contract?

Conclusions

26. In our judgment, the Applicant's contentions are correct. The contract itself, is by Clause 1, expressly to terminate on a finite date. That satisfies the primary definition of a fixed-term contract in the Regulations. It is to be noted that Clause 1 is not subject to any other provision of the contract. It is also to be noted that in the letter of appointment there is no qualification to the straightforward offer of a fixed-term position.
27. If all we were looking at were Clause 1 and the offer letter, this was not a fixed-term contract within the Regulations One has to look further into the contract to see any qualification.
28. Looking at Clause 8, therefore, the question is does this detract from the potency of Clause 1? In our judgment it does not. The ability of the Respondent, or, indeed, the Applicant, to bring the contract to an end at an earlier date, does not make this anything other than a fixed-term contract. For what is envisaged by the Regulations is a provision relating to the termination of the relationship "in the normal course". We hold that in the normal course this contract will determine by the operation of Clause 1.
29. It must be exceptional for earlier notice to be provided. We accept that what would not be normal would be the events submitted on behalf of the Applicant, such as frustration or material breach. No doubt the parties hoped that they would stay together throughout the duration of this contract, without what we hold would be the unusual step in them terminating the relationship early.
30. It will be recalled that the contract was expressly subject to satisfactory references and so on, and the rate of pay indicates the responsibility of the Applicant in the position that he held. The Respondent's skeleton argument is also illustrative of the difficulty in this case for Mr Morgan submitted as follows in respect of the ability of the employer to terminate earlier, he said this:-

"As standard, the Respondent retained the contractual right to terminate earlier, without cause, in the interests of its business to ensure that the project on which the Appellant was engaged may be delivered to the Respondent's satisfaction. Commonly, the notice provisions will be invoked by the Respondent before the expiry of an envisaged fixed term."

31. Now, strictly speaking, that involves some evidence. There was none before the Employment Tribunal. It remains, as it was before the Employment Tribunal, a submission but the use of the word "earlier" invokes the question, "earlier than what"? To which Mr Morgan answered "earlier than 31 July, the set date in Clause 1." "Commonly", also invokes what is uncommon but it does not answer the question of what is normal and although it may be common for an employer and employee to reach the conclusion that they cannot live with each other and must give one week's notice, it is, in our judgment, not the normal course as envisaged by definition of a fixed-term contract. The normal course would be to stay with each other throughout.
32. Thus as a matter of application of the definition to these clauses, we hold that there is no diminution in the ability of the employee to claim the protection of these Regulations, simply by reason of the earlier notice provision. We are told by Mr Morgan, and it is our experience too, that in the world of work, contracts, particularly of higher paid employees, are often for a fixed-term, with an earlier notice provision. In our judgment, the provision for such earlier notice will not destroy the original intention in such a contract, if it be in the form of the one in front of us, that the parties would see through the fixed-term, unless and until some event which was not in the normal course occurred, causing them to separate. Nor will it limit the right of an employer to dismiss a highly paid executive who is not performing, provided the executive is not treated less favourably than a comparable permanent employee.
33. In our judgment, that gives full effect to the purpose set out in the Directive which Parliament has faithfully embodied in the Regulations. It also deals with the problem which was envisaged in an article in Employment Law Bulletin which is the practitioners journal of the Employment Lawyers' Association, and is authoritative. It is written by Professor Vic Craig, who is himself an Employment Tribunal Chairman, here in Edinburgh, and he raises the spectre of the apparent fixed-term contract, that is, a contract which looks like a fixed-term contract, but which is actually not, and the learned professor says this:-

"It is perhaps surprising that no express mention is made of apparent fixed term contracts. The policy for regarding them as fixed term contracts was to prevent employers manipulating contract terms in such a way that when such contracts expired there would not be a dismissal for the purposes of redundancy and unfair dismissal law. The issue would seem to revolve around whether a term permitting earlier termination would be a provision determining how the contract would terminate "in the normal course". Arguably reliance on an earlier termination clause would not be in the normal course, so that even apparent fixed term contracts would fall within the definition contained in the Regulations." (see Emp.L.B.2002, 51(OCT), 6-8).

34. We agree, for we hold that the policy of the Directive and thus of the Regulations, is to protect an employee, who has (it must be assumed for the purposes of this preliminary point), a complaint that he was treated less favourably because he had a fixed-term contract providing less access to procedures than a comparable permanent employee has.
35. We mention that without comment at all on the substance, or, even the accuracy of the material, but simply to illustrate that there is a serious dispute between the parties to be litigated. As in all cases of discrimination, it is very important that a threshold, over which an employee must cross in order to have access to the seat of justice should be low, for discrimination in all its forms, is an issue which must be determined on the facts at a full hearing, unless, unarguably, the case falls outside the protection.
36. We would very much like to thank both of the representatives this morning for the concise way in which they have presented their arguments.
37. The appeal is allowed. It will be remitted to the same Employment Tribunal for a hearing. This case will come on some time in October and will be regulated by the new procedure Regulations. 28 days from now there will be exchange of witness statements of all of the witnesses to be relied upon and that will stand as their evidence in chief.
38. The Applicant will apply for a two-day hearing before the same Tribunal, but if that proves to be impracticable in the Vice-President's consideration, as she will be from 1 October, then it can go to a different Tribunal now that we have determined the issue of law.