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Dismissals based on expiry of fixed-term contracts and the duty to consult

Posted by TonyBrownEmploymentSolicitor on January 9, 2014

According to the next case, employers may not have to include dismissals resulting from the expiry of a fixed-term contract when calculating whether the duty to consult employee representatives about redundancy applies. It alters the orthodox view which was that dismissals resulting from the expiry of fixed term contracts should be included when calculating the number of dismissals. However, employers still need to exercise care.

Under the Trade Union and Labour Relations (Consolidation) Act 1992, where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, it is required to consult on its proposal with appropriate representatives of the affected employees. There are large financial penalties to pay for failure to observe the statutory duty.

In this context, “dismiss as redundant” means a dismissal “for a reason not related to the individual concerned”.

In the latest case, all the employees were employed on fixed-term contracts and were dismissed when their contracts came to an end. The employees’ union alleged that the employer was in breach of its collective redundancy consultation obligations.

The tribunal ruled that, provided the other required conditions are satisfied, a dismissal on the expiry of a fixed-term contract should always count for the purposes of calculating whether the duty of collective redundancy consultation applies.

Allowing the employer’s appeal, the EAT (with whom the Scottish Court of Session has now agreed) said that the tribunal had failed to ask the crucial question of whether or not the employees’ dismissals in this case were for reasons relating to the individuals.

While the collective consultation obligations can apply to dismissals on the expiry of fixed-term contracts of more than three months (the legislation excludes shorter fixed-term contracts), the key question is whether or not the dismissal is for a reason “related to the individual”.

"A reason relates to an individual if it is something to do with him, such as something he is or something that he has done".

The EAT said that, in this case, at least one of reasons for each employee’s dismissal was that the employee had agreed to enter into a fixed-term contract that would come to an end at a particular date or on the occurrence of a particular event. This amounted to a reason that related to the individual concerned and as such did not trigger the collective consultation duty.

Comment

It was important to the ruling in this case that the EAT was satisfied that the employer had simply allowed the fixed term contracts to come to their natural end and that no other wider business-related factors played a part in the decision. However, in many cases it may not be as clear as to whether the expiry of the fixed term is just connected to matters "direct and personal" to the individual and not to any wider business imperative to reduce costs or to increase efficiencies.

To be safe, employers may still wish to assume that fixed term contracts due to expire should be counted in general redundancy numbers unless it is clear that the non-renewal is for a reason related to the individual concerned.

If you would like advice about how the issues in this note apply to your situation, please contact Tony Brown on 01225 740097 or by e mail to tony@bathemploymentlaw.co.uk

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