In a landmark case on the distinction between fixed-term contracts and contracts of indefinite duration, the Labour Court has determined that the inclusion of a provision that a contract was “subject to programme funding and student enrolment” rendered it a fixed-term contract. This was held to be the case even though the employer was arguing that the contracts in question were of indefinite duration (commonly referred to as a “permanent contract”)
Background to the case
The case in question was County Dublin VEC and O’Grady & Others (FTD1127). This case was heard by the Labour Court after the County Dublin VEC appealed the decision of the Right’s Commissioner to award compensation to all nine employees under section 6 of the Protection of Employees (Fixed-Term Work) Act, 2003. Section 6 states that fixed-term employees must not be treated in a less favourable manner than a comparable permanent employee in respect of their terms and conditions and the Rights Commissioner was of the opinion that the employees here had been treated less favourably.
The CDVEC's argument
The CDVEC argument was simple – under fixed-term rules, an employee may only take a complaint to the Rights Commissioner within six months from the date that the initial unfavourable treatment commenced. The CDVEC highlighted that they had offered the employees in question contracts of indefinite duration in January 2009 and that subsequently, they furnished their contracts of indefinite duration in May of 2009. The employees didn’t take their claims to the Rights Commissioner until September 2009.
It was argued therefore that the Rights Commissioner didn’t have the jurisdiction to make any decision as the CDVEC had recognized long before the complaint that the employees were entitled to contracts of indefinite duration and therefore (a) their claims were out of time as the claim was taken nine months after indefinite status was recognized in January and (b) they weren’t actually fixed-term employees at the time of their claim and were instead permanent employees.
The employees’ argument
The employees’ argument was also simple. The employees contended that they had all become entitled to contracts of indefinite duration at varying stages between 2004 and 2007. They argued that their claims to the Rights Commissioner were not of time because the contracts offered to them in January and May 2009 weren’t in fact indefinite, as contended by the CDVEC, but were still, in fact, fixed-term contracts. Therefore, the argument was that (a) the claim was not out of time as their indefinite status was never recognized and (b) they were still fixed-term employees.
The contract in dispute
The contract that the CDVEC offered in May 2009 contained the following provision:
“The contract is in accordance with the terms of the Department of Education and Science Circular Letters 55/2008 and 56/2008. The contract is subject to programme funding, student enrolment and Registration on a current basis, with the Teaching Council of Ireland.”
The Labour Court Determination
The Labour Court considered the definition of the a fixed-term employee which states that a fixed-term employee “means a person having a contract of employment entered into directly with an employer where the end of the contract of employment concerned is determined by an objective condition such as arriving at a specific date, completing a specific task or the occurrence of a specific event”. The Labour Court considered this definition as against the contract in dispute and the clause mentioned above.
Accordingly, it was determined that the nine employees had not been offered contracts of indefinite duration as they were in all reality fixed-term contracts. The reason was because the insertion of the wording that the contract was “subject to programme funding, student enrolment and Registration” meant that the contract was determinable “by the occurrence of a specific event”. Essentially, the specific event occurs if funding is no longer available or if student enrolment falls below a certain level of if registration ceases.
Conclusion
This case evidences how careful employers will need to be when putting together contracts of employment for their workforce. It is well-established now that contracts that are subject to funding will be deemed to be fixed-term contracts and not contracts of indefinite duration. Indeed, case law suggests that employers can keep renewing fixed-term contracts for employees, even beyond 4 years, where those fixed-term contracts and the position on offer is entirely reliant on funding being provided for the post [Buckley and NUI Maynooth (FTD092)]. This is important because fixed-term rules normally stipulate that an employee must be made permanent after 4 years if they have had two or more fixed-term contracts.
The basic principle to take from the above is that employers should ensure that contracts are properly and effectively constructed. A poorly constructed permanent contract will be deemed fixed term if it states that it is subject to funding. Conversely, a fixed-term contract that is subject to funding, but doesn’t specify this in its text, will likely render the contract to be one of indefinite duration if the employee works past 4 years.
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