Guidelines on Contract Management/Employment of Temporary Staff

Temporary contracts are a feature of employment in the University of Limerick as they are in many other organisations. The management of temporary contracts is critical for the management and staff of the University to ensure the delivery of a first class service to our students and other customers. Staff need certainty around employment prospects and it is unfair to staff to create an environment where contracts roll over from month to month or year to year. From a management perspective this creates huge layers of bureaucracy and administration. This type of environment is not productive for staff or management and increases our staff cost base. It is the responsibility of all Managers and Supervisors to accept the financial ownership of contract management and ensure the University’s overall staff costs are not increased by default.

In the University of Limerick we employ permanent and temporary Faculty, Staff and Researchers. To enable us to provide the best possible levels of service it is very important that we recruit from the widest possible pool of applicants and have a fair and transparent process for making these appointments. Selecting Faculty, Staff and Researchers by way of open competition is therefore essential to achieving this objective. Therefore we should make every effort to recruit staff on a permanent basis through open competition. However there will always be a need to recruit temporary staff so we must ensure we comply with the relevant employment legislation.

The Protection of Employees (Fixed-Term Work) Act 2003 which came into force on the 14th July 2003 has had major implications for the employment of temporary staff in the University of Limerick. There is a lot of confusion about the definition of fixed-term and to whom the label applies. In the University fixed-term employees were traditionally described as temporary and persons employed on contracts of indefinite duration were traditionally described as multi-annual or permanent.

Definition of Fixed-Term ContractA fixed-term contract is a contract the end of which is determined by one of the

following three objective conditions: -

(i) the arrival of a specified date; or

(ii) the completion of a specified task; or

(iii) the occurrence of a specified event.

Type (i) is the principal type of fixed-term contract whereas types (ii) and (iii) are what is also known as “specified purpose contracts”.

Regulating the Use of Fixed-term Contracts – Section 8 Section 8 of the legislation is particularly important from the University’s perspective and requires us to rethink the way we administer fixed-term contracts. The legislation is not intended at limiting the use of fixed-term contracts per se. Rather it is intended to prevent the successive use of fixed-term contracts in a manner which is deemed to constitute abuse. Recent decisions under the 2003 Act have reinforced the importance of the correct administration of fixed-term contracts, both at the initial stage and the renewal stage. The Act itself stipulates certain information must be provided to all

fixed-term employees in their contracts of employment. This aspect of the Act is one which we must pay special attention to. Managers must be extremely vigilant to ensure that the temporary contract reflects the specific circumstance of each individual’s temporary employment.

Fixed-term Contract The Act stipulates that fixed-term employees must be informed which of the three conditions (i), (ii) or (iii) above will apply to the ending of their contract. Therefore, at the commencement of an employee’s temporary employment s/he should be provided with a contract, which in addition to providing the standard information relating to the terms and conditions of employment, should include information relating to the employment circumstances and the objective reason which will bring about the termination of their contract, e.g. • Reaching a specific date, e.g. 31st December 2010

Renewal of fixed-term contracts – section 9 of the 2003 Act Every effort should be made to identify the exact duration of the contract and the contract issued for this period so it will not have to be renewed. Initial fixed-term contracts can be issued for any period (1 year, 3 years, 5 years, 10 years). If the employee’s contract is terminated after this initial period (reaching the expiry date after e.g. 1 year, 3 year, 5 year, 10 year contract) i.e. there is no renewal, the employee has no further entitlements under this legislation and s/he is not entitled to a contract of indefinite duration.

Renewing fixed-term contracts is where employees gain potential entitlements. Section 9(2) of the legislation states that where fixed-term employees are recruited after the passing of the Act and are employed on two or more continuous temporary contracts the total duration of these contracts may not exceed four years or the contract will be deemed to be one of indefinite duration. For example, an employee whose two year initial fixed-term / temporary contract is subsequently renewed will be automatically deemed to have a contract of indefinite duration when a four year aggregate has been exceeded in the absence of objective grounds.

Information to fixed-term employees on renewal of a fixed-term contract – section 8 of the 2003 ActThe University must also inform the employee in writing of the objective reasons (see Appendix 2 – sample letter) for the renewal of the fixed-term contract and the reason as to why s/he is not being offered a permanent contract. This information must be set out in writing (separate to the employment contract) to the employee no later than the date of the renewal. The University cannot retrospectively supply this information to the employee. This aspect of the Act is one which we must pay special attention to. Managers must be extremely vigilant to ensure that the temporary contract reflects the specified circumstance of each individual’s temporary employment.

Certain positions within the University of Limerick are not permanent and probably never will be i.e. Research Post Docs. Therefore good practice in relation this staff grouping would be to issue X (2/3/4/?) year non-renewable fixed-term contracts. Research Post Docs should be informed of this in advance of taking up a research post so they are fully informed and have no false expectations.

Specific Purpose ContractsMany fixed-term employees are employed for a specific purpose the length of time for which they will be employed may not be capable of being determined at the initial appointment stage. For example, an employee might be employed in a post pending it being filled in a permanent capacity through open competition. This type of fixed-term employee should be issued with a specific purpose contract, which outlines the specific purpose for which they are employed clearly stipulated on the contract and the specific event which will bring about the contract’s termination.

Example 1: “You are employed pending the filling of the post on a permanent basis through open competition. Your employment will terminate when the post is filled on a permanent basis”.

Example 2: “You are employed to cover the career break of Mr John Smith. Your employment will terminate upon Mr Smith returning to work at the termination of his career break”.

Example 3: “You are employed on a SFI funded Crystallisation Project. This is a temporary post and your employment will terminate when the SFI funded Crystallisation Project comes to an end”.

Example 4: “You are employed to cover for Ms Celia Murphy while she is on sick leave. Your employment with the University of Limerick will terminate when Ms Murphy returns from sick leave. You are not being offered a contract of indefinite duration as Ms Murphy is the permanent holder of this post”.

Example 5: (Funding dependent on fee income & customer demand e.g. Adult Education): “The funding for this post is dependent on customer demand and fee income. The continuation of your employment is dependent on the continuation of such customer demand and fee income. Your employment will terminate in the event that funding for the post is no longer available”. (Levels of Customer Demand & Fee Income need to be defined in advance).

Renewing specific purpose Contracts like fixed-term contracts is where employees gain potential entitlements. Section 9(2) of the 2003 Act states that where fixed-term employees are recruited after the passing of the Act and are employed on two or more continuous temporary contracts the total duration of these contracts may not exceed four years or the contract will be deemed to be one of indefinite duration.

For example, an employee whose specific purpose contract is subsequently renewed for another purpose will be automatically deemed to have a contract of indefinite duration after an aggregate of four year, in the absence of objective grounds.

The University must also inform the employee in writing of the objective reasons (see Appendix 2 – sample letter) why a new specific purpose contract is being issued and the reason as to why s/he is not being offered a permanent contract. This information must be set out in writing (separate to the employment contract) to the employee no later than the date of the renewal. The University cannot retrospectively supply this information to the employee.

Given the possibility of certain research projects being awarded no cost extensions past the initial contract period, there is a risk that contracts of indefinite duration would be created as a result. Therefore all contracts funded by research providers that provide for no cost extensions (e.g. SFI) should be issued specific purpose contracts to avoid the creation of contracts of indefinite duration should a no cost extension be awarded.

Termination of Contracts If the renewed contract terminates before the employee comes within the scope of S. 9(2) of the Act (4 years), then the employee has no further entitlement under the 2003 Act. However there are anti-avoidance measures that the employer needs to be aware of which are outlined below. Where the employer decides not to renew a fixed-term contract or offer a permanent appointment, the decision for the termination must correspond with the information provided in the contract, and the employment should not merely be terminated because the timeframes as provided for in Section 9(2) are within sight.

Section 13(i)(d) of the 2003 Act prohibits an employer from penalising an employee by dismissing him/her in circumstances “wholly or partly for or connected with the purpose of the avoidance of a fixed-term contract being deemed to be a contract of indefinite duration under section 9(3)”.

A decision to terminate could also give rise to a claim under the Unfair Dismissals Acts, 1977-2007 if the employee perceives that the employment did not genuinely end i.e. there is still an ongoing requirement for the work performed by the employee.

It is important that every fixed-term and specified purpose contract contains the following language: -“The Unfair Dismissals Acts 1977 to 2007 shall not apply to the termination of your employment by reason only of the [expiry of this fixed-term contract/the completion of the specified purpose of this contract] without it being renewed”.

Contracts of Indefinite Duration – Section 9

Section 9(2) of the legislation states that where fixed-term employees are recruited after the passing of the Act and are employed on two or more continuous temporary contracts the total duration of these contracts may not exceed four years or the contract will be deemed to be one of indefinite duration.

The question has been asked as to whether or not there is a distinction between permanent employees and employees who acquire indefinite duration status under the Act. This issue was addressed in a decision under this legislation by the Rights Commissioner, who defined a contract of indefinite duration as follows:

“A person who has an expectation that subject to the normal date of retirement in the employment, she will be retained in the employment and will not be dismissed without there being any good reason such as misconduct or unfitness for her position, or other compelling or unavoidable circumstances. Any dismissal shall be achieved by the application of the agreed termination

arrangements for her employment or the application of the relevant Statute as the case may be by reference to the comparable employee, in this case, an established civil servant.

The Labour Court subsequently upheld this view.

There is no distinction in practical terms between either category of employee and the term indefinite duration could be used to describe all employees who are not employed on a fixed-term basis. It should be noted that indefinite duration/permanent status does not mean that the employee’s employment cannot be terminated on grounds of misconduct, capability, redundancy or any of the grounds set out in the Unfair Dismissals Act, 1977-2007.

Conclusion

Fixed-term/temporary contracts must be managed very carefully. Managers must give careful consideration as to the reasons and duration of the contract in order to determine whether a fixed-term or specific purpose is the most suitable contract to issue. Every effort should be made to avoid any reason for the initial contract to be renewed. Contracts of indefinite duration will be treated the same as multi-annual contracts in faculty/staff allocation models. It is the responsibility of Deans, Heads of Department, Divisional Directors, Managers and Supervisors to accept the financial ownership of contract management.

The university is committed to having NO new contracts of indefinite duration  in the future. In the event that these occur in ANY  manager's area of responsibility in the future , that area will have to cover the cost of the contract of indefinite duration from their existing budget. Research projects are dependent on financial support from external bodies therefore employment contracts must be managed so contracts of indefinite duration are not created in research areas and if they are created, the budgetary implications will have to be borne by the Department to which they are attached.

Appendix 1

Questions and Answers

1 · Does there have to be objective justification for an employer to enter into a fixed-term arrangement in the first place?

No, employers do not have to specify an objective justification for entering into a fixed-term contract in the first place, although an objective justification has to be provided for all renewals of the fixed-term contract and the failure to offer a contract of indefinite duration. 

2. Is it possible to have a once off fixed-term contract in excess of four years?

Yes, there is nothing under the Protection of Employees (Fixed-Term Workers) Act, 2003, which prevents this.  The Act simply prevents the use of successive fixed-term contracts which exceed an aggregate duration of four years where there is no objective justification.  However, there is nothing to prevent a fixed-term contract for a period, for example, of five years, from being entered into in the first instance. 

3· Can you give an employee a fixed-term contract for five years if the project is a five year project?

There is nothing to prevent this.  However, if the employment is project based, it might be more advisable to offer a specified purpose contract stating that when the project comes to an end, so will the contract.  This will prevent renewals from having to be entered into where the contract does not come to an end within the time frame which was first anticipated.

4· In reality, are there any circumstances in which you can treat contract of indefinite duration staff differently to permanent staff.

It is important to remember that such employees can be treated differently, as long as they are not being discriminated against on one of the nine grounds set out in the Employment Equality Acts 1998 to 2007 and as long as the employer is not in breach of their obligations under the Protection of Employees (Part-Time Work) Act 2001 and the Protection of Employees (Fixed-Term Work) Act 2003.  The 2003 Act requires employers to treat fixed-term workers no less favourably than permanent staff, which does not necessarily mean that contracts of employment must be identical as contracts can be equal in value. 

5· Where an employee receives a five-year residential/work permit, what kind of contract should be issued to the employee and what obligations does the University have?

A failure to renew a fixed-term/specified purpose contract of employment arising out of the failure of an employee to secure renewal of residential/work permit status is objective justification for failing to offer a contract of indefinite duration.  For the University to continue the employment of an individual who does not have a valid work permit is a criminal offence under the Employment Permits Acts.  Therefore, a five-year fixed-term contract of employment for an employee who only has a valid work/residential permit for that length of time is perfectly acceptable.  Even if the employee had been on successive fixed-term contracts, failure to offer a contract of indefinite may be objectively justifiable in circumstances where the employee did not have the right to continue residing/working in Ireland.

6· If an employee has in excess of four years employment as a teacher in a school but is not qualified as a teacher, is lack of qualification objective grounds for not giving a contract of indefinite duration? 

The fact that a teacher was non-qualified was held to amount to objective justification under the Protection of Employees (Part-Time Work) Act 2001 in Louth VEC –v- Martin (2005).  It depends on the individual circumstances of each case, but lack of qualification is likely to be objective justification.

7· A person has been appointed for various periods of breaks for the last 3.5 years as a locum, with no defined/specified weekly hours, providing cover for annual, sick, study leave, i.e. as and when required.  If it is found he/she is entitled to a contract of indefinite duration, would he/she have to have specified weekly working hours?  As a locum, he may not be required every week, he is only required when a regular employee is absent.

In the case of the HSE West –v- 90 Named Complainants, the Labour Court determined that the contract of indefinite duration that has been offered by the HSE in that case, which did not specify a minimum weekly working hours, was unacceptable and that a contract of indefinite duration must specify a minimum number of weekly working hours.  In coming to its Determination, the Labour Court relied on the Organisation of Working Time legislation which deals with zero hours contracts.  In that regard, regardless of whether a minimum number of weekly working hours is specified in a contract of employment, the Organisation of Working Time Act, 1997, states that where an employee working under a zero hour contract, works less than 25% of his/her hours in any week, the employee must be compensated.  The level of compensation depends on whether the employee got any work, or none at all.  If he/she got no work, the compensation should either be 25% of the possible available hours or compensation for 15 hours work, whichever is less.  If the employee got some work, he/she should be compensated to bring him/her up to 25% of the possible available hours.

8· Where an employee becomes entitled to a contract of indefinite duration but has not been on a regular grade (with increments), how is he/she to be treated in the future for pay and other benefit improvements?

It will depend on the individual circumstances of each case.  As a fixed-term employee, his/her terms and conditions should not have been any less favourable than

a comparable permanent employee.  Therefore, a failure to offer him/her a regular grade with increments may in itself have been less favourable treatment.  When an employee becomes entitled to a contract of indefinite duration, it is assumed that their fixed-term contract from which the CID is derived was not less favourable than a comparable permanent employee to begin with.  This question very much turns on the individual circumstances/facts of the particular case.  As outlined above, it is acceptable to treat employees differently provided you are not breaching any legislation by doing so.

9· If you are employing a new relief worker on an “if and when required” basis, must you state a minimum number of hours in the contract?

No. However, the Organisation of Working Time Act 2007 provides for zero hours contracts and regardless of whether you state a minimum number of hours or not, the employee will be entitled to compensation. 

10· Could a permanent worker bring a case if his/her conditions of employment are less favourable than a fixed-term contract worker?

Not under the 2003 Act. However, the employee may have a valid claim if they can prove that they are being discriminated against on one of the nine grounds outlined in the Employment Equality Acts. 

11· If you employ a person for a specific block of work for a definite period and it transpires it is necessary to extend the period to complete the task, does that employee have a right to be retained by the employer and assigned to other duties?

Not necessarily.  Where an employee is employed for a specific block of work, it would seem to make more sense to employ them under a specified purpose contract of employment as opposed to a fixed-term contract of employment.  There is nothing wrong with extending a fixed-term contract of employment, which will bring the employer into the realm of successive fixed-term contracts, provided there are objective reasons for renewing the fixed-term contract and failing to offer a contract of indefinite duration.  If the employer can show that the specific block of work is the reason for the extension of the fixed-term contract and the failure to offer a contract of indefinite duration, then the employer is likely to have objective justification.  However, objective justification is something that must turn on the individual facts of each case. 

12· What is the difference between a permanent contract of employment and a contract of indefinite duration?

In essence, there is no difference. The 2003 Act uses the expression "contract of indefinite duration" rather than "permanent". No position is permanent in the sense that any contract of employment can be terminated in accordance with its terms and provided the employer has a valid reason to terminate having regard to the Unfair Dismissals Acts 1977 to 2007.

13· For a contract commencing after July 2003, is there any limit on the amount of contracts that can be given within the four year limit?

No. An unlimited number of successive fixed-term contracts can be issued within the four year time limit provided the employer at renewal date gives the employee a written statement setting out the objective justification for renewing the fixed-term contract and failing to offer a contract of indefinite duration.  It would seem to be an administrative burden to have numerous successive short fixed-term contracts of employment and therefore best practice would dictate that an employer should give an employee the longest fixed-term contract available in the first instance.

14· How is a contract of indefinite duration terminated?

On notice, as for a permanent contract of employment.  The general rules of natural justice and fair procedures will apply to the termination of a contract of indefinite duration just as they do to a permanent contract of employment.

15· If an employee has a contract of indefinite duration but is appointed to an “acting up” position on a temporary basis, does the legislation apply to the acting up position?

No. The issue of an “acting up” position is separate from the issue of an employee’s entitlement to a contract of indefinite duration. However, it is very important that the terms upon which an employee is required to fill a role on an “acting up” basis are clearly set out in writing.

16 · If a fixed-term employee is terminated at the end of the contract, are there any repercussions for the employer if he/she subsequently fills the job of another fixed-term worker or makes the position a permanent one for the new incumbent?

This will very much depend on the individual circumstances.  Section 13 of the 2003 Act deals with penalisation of employees and prohibits penalisation of the employee by way of termination of a contract.  If it could be shown that the termination of the contract/dismissal of the employee was to avoid the employer’s obligations under the 2003 Act, then the employee would have a cause of action against the employer.  Furthermore, the employee may have a cause of action under the Unfair Dismissals legislation if the Employment Appeals Tribunal was satisfied that the termination of the fixed-term contract was purely to avoid obligations under the Unfair Dismissals legislation.

Appendix 2

STRICTLY PRIVATE & CONFIDENTIAL[Employee Name][Employee Address]

[Method of delivery of letter]

[Date of letter]

Re: Contract Renewal

Dear [Employee name],

I refer to your fixed-term contract of employment, which is due to expire on [insert date].

The University would like to renew your contract of employment for a further fixed-term, which will expire on [insert date] unless otherwise terminated in accordance with the provisions of the contract.

The University is not in a position to offer you a contract of indefinite duration and is therefore offering to renew your contract for a further period of [insert period e.g. 1 year] for the following reason [insert reason – see examples above].

I enclose a further fixed-term contract for your review. Please respond to me in writing, to be received by me no later than [insert date], confirming whether you accept this contract renewal as well as the terms and conditions set out in the contract.

Yours sincerely,

_____________[Insert name][Insert job title]

For and on behalf of the University of Limerick.

Material for this paper was sourced from:

Arthur Cox SolicitorsLegal IslandHEA-EA