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Non-Renewal Of Fixed Term Contracts

The non-renewal of a fixed term contract (FTC) can be regarded as a dismissal. Employers tend to assume that in most cases the non-renewal of a FTC will be for some other substantial reason, which is a potentially fair reason for dismissal. In fact, in the case of maternity cover, where FTCs are often used, section 106 of the Employment Rights Act 1996 provides that an employee shall be regarded as dismissed for “some other substantial reason” and therefore, potentially fairly if:

  • on engaging him the employer informs him in writing that his employment will be terminated on the resumption of work by another employee who is, or will be, absent wholly or partly because of pregnancy or childbirth and;
  • the employer dismisses him in order to make it possible to give work to the other employee

In the light of this employers have assumed that where an employee is engaged to cover maternity leave it will always be fair to dismiss them when the original employee returns.

But you could find that things backfire if you make assumptions and don’t make the reason for the FTC clear and say that the contract will end when the post holder returns from maternity leave. The risks of a failure to do so are illustrated in the case of Victoria and Albert Museum v Durrant [2011]. Mr. Durrant had had long service. In 2005 he was absent on grounds of ill health for several months and could not carry out his original role. For about 18 months he worked on a series of FTCs while applying for other roles, but he was unsuccessful in being appointed to an alternative position. The employed went through its capability process and Mr. Durrant was dismissed, on six months’ notice.

During this time he was transferred onto a six-month fixed term contract, providing cover for an employee who was on maternity leave. He was given a letter which said that the reason for his six-month fixed term contract was to “cover a period of maternity leave”. There was no specific statement about future termination on the return of his colleague from maternity leave. Eventually Mr. Durrant was dismissed. He claimed unfair dismissal, arguing that the real reason for his dismissal was redundancy.

The EAT found that section 106 ERA did not apply in this case because the employer had not given clear notice at the start of the FTC that the contract would end when the employee on maternity leave returned to work. The court remitted the case back to the tribunal to determine whether Mr. Durrant was redundant.

The moral is that if you are employing a person on a FTC to cover maternity leave, make the fact clear as well as the circumstances in which it will terminate. And ensure that you follow a fair dismissal process.

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