Fixed Term Work Update

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Fixed Term Work Update

May 31, 2022

The Supreme Court recently issued a key decision on what constitutes a fixed-term employee in Ireland under the Protection of Employees (Fixed-Term Work) Act, 2003 (the 2003 Act). The focal point in the case was whether a permanent employee who agreed to cover another post on a fixed-term basis met the definition of a fixed-term employee under the 2003 Act. The Supreme Court found that he did.

The case has been remitted back to the Labour Court to decide whether the employer’s use of several fixed-term contracts over more than 4 years can be objectively justified. Under the 2003 Act, a fixed-term employee may ultimately become entitled to a contract of indefinite duration if (i) they are engaged on two or more successive fixed-term contracts; (ii) the aggregate duration of such contracts exceeds four years; and (iii) the employer cannot justify the use of successive fixed-term contracts.

Background Facts

In this case, Mr Power was the Chief Financial Officer (CFO) of the HSE’s Saolta Hospital Group engaged on a permanent employment contract. His employer approached him to take up the more senior Chief Executive Officer (CEO) position in an interim capacity. Mr Power accepted this temporary arrangement and it was agreed it would end on the earlier of 31 March 2015 and the date of appointment of a permanent CEO. When the temporary post ended, he would revert to his substantive terms as an employee of the HSE. This arrangement was renewed several times over a four-year period until the post was eventually advertised on a permanent basis for a five-year term in 2018.

Mr Power failed in the open competition for the CEO role and the HSE envisaged that he would return to his CFO role. However, Mr Power asserted that he was entitled to remain in the CEO position indefinitely under the 2003 Act because he had been engaged on successive fixed-term contracts over four years. In response, the HSE asserted the 2003 Act protects only fixed-term workers and is not applicable to an individual that already occupies an underlying permanent role.

Labour Court

Mr Power’s claim before the Workplace Relations Commission (WRC) failed. On account of his permanent role with the HSE, the Adjudication Officer decided he had no legal standing to bring a complaint under the 2003 Act.

On appeal, the Labour Court affirmed the WRC decision describing its conclusion as “inescapable” given that Mr Power’s CFO position was “at no material time” at risk or under threat. By automatically reverting to the terms of his CFO role after the acting up arrangement, the CEO role was “temporary” and supplemental to his otherwise undisputed permanent employment status. The Labour Court concluded he could not rely on the 2003 Act for protection.

High Court

The High Court upheld Mr Power’s appeal. It held that Mr Power met the definition of a fixed-term employee under the 2003 Act. The end of the CEO contracts had been determined by an objective condition (i.e. a specific date or the occurrence of a specific event). Even if the employee had an enduring employment relationship with the HSE, this did not change the fact that he had been engaged on a series of fixed-term contracts. Additionally, Simons J ruled that “an individual can be employed by the same organisation in a series of different posts, each subject to its own terms and conditions”.

The Supreme Court granted the HSE leave to appeal, as it raised a point of law of general public importance.

Supreme Court

At the Supreme Court the HSE raised a new argument, that Mr Power’s temporary CEO arrangement was actually “an agreed variation” to his original permanent CFO contract. The HSE asserted that no termination of Mr Power’s original contract took place, and it continued throughout the acting up arrangement.

However, the Supreme Court held that his original permanent contract was “either terminated, or at least suspended”. The variation argument did not accord with “the factual or legal reality of the situation”. At the time, Mr Power was engaged on a series of fixed-term contracts. He had signed written terms specific to the interim CEO role and the HSE had referred to the renewal of fixed-term contracts in correspondence. The agreement that Mr Power would return to his substantive CEO post was merely a term of those fixed-term contracts as opposed to evidence that his permanent CFO contract was continuing. If at the relevant time Mr Power was engaged on a fixed-term contract and was a fixed-term employee, it followed that he could not be a “permanent employee” within the meaning of the 2003 Act.

The Supreme Court further acknowledged that the 2003 Act contains no provision removing its application to employees in acting up roles. This was a significant factor in the Supreme Court reaching its determination. Issuing judgment on behalf of the Supreme Court, Woulfe J commented that “very clear language providing for any such exclusion would have been necessary”.

The Supreme Court dismissed the HSE’s appeal and remitted the matter back to the Labour Court to consider whether the renewal of the successive fixed-term contracts was justified.

Observations

The case highlights the risk of engaging an existing, permanent employee to fill an interim post on successive fixed-term contracts over an extended period of time. Such an employee can benefit from the protections afforded by the 2003 Act, despite an entitlement to return to their substantive role at the end of the interim appointment. The risk is that the employee will be deemed to be engaged in that interim post on a contract of indefinite duration. This could happen if the aggregate duration of the fixed-term contracts exceed 4 years and the employer cannot objectively justify the renewal of the fixed-term contract.

An employer needs to be clear about why it is using a fixed-term contract and keep this under review, especially when the employee is approaching the 4-year threshold. The employer must give the employee a statement setting out the objective grounds justifying the renewal of the fixed-term contract. The WRC and Labour Court can draw an adverse inference if the employer fails to do so. Employers should also consider whether it would be appropriate to temporarily vary an existing employee’s permanent contract if they are “acting up” in another role, rather than using a fixed-term contract. Above all else, employers are encouraged to promptly initiate recruitment processes and avoid unnecessary lengthy delays in filling vacant long-lasting roles.