An employee with two years' continuous service dismissed on grounds of redundancy is entitled to a statutory minimum of two weeks’ pay per year of service plus one bonus week, capped at €600 per week. In recent years, many employees made redundant have had to settle for this minimum payment and the recent reduction of the state rebate on the lump sum available to employers from 60% to 15% is unlikely to have helped this situation. Nonetheless, redundancy packages with better terms are often offered, whether by virtue of a trade union/employer agreement, custom and practice or contractual negotiation.

However, an employer proposing such arrangements needs to be vigilant that they are not offered in a discriminatory manner. The first case reviewed in today’s mail, a complaint under the Protection of Employees (Fixed-Term) Act 2003, concerns such an allegation. In this instance, on appeal to the Labour Court, An Post failed in its attempt to show that it had not treated two fixed-term employees in a discriminatory manner, in terms of the redundancy payments offered to them compared to that of comparable permanent colleagues also made redundant.

Section 9 of the 2003 Act also provides that where an employee is employed on two or more continuous fixed-term contracts, the combined length of the contracts must not exceed four years. Where any term allows a contract to exceed this limit, it will have no effect and the contract concerned shall be deemed to be a contract of indefinite duration (or permanent status), unless there are ‘objective grounds’ justifying a renewal of the fixed-term contract beyond the limit.

Most of the cases brought under this heading so far concern employees employed under contracts for a fixed term – those that will end on a specific pre-determined date. However, the definition of a fixed-term employee under the legislation also includes those employees working on what are known as fixed purpose (or specified purpose) contracts – those that will end when a specific task is completed or when a particular event occurs, such as the completion of a project or another employee returning from a period of leave, illness or career break. The second case reviewed in today’s mail concerns such a contractual arrangement, where the employer in effect argued that the claimant’s employment in total only involved one rolling specified purpose contract so that Section 9 did not apply. The employee in turn argued that the contract had been renewed after its original purpose had been achieved, thus bringing the section into play.

These cases are:

* An Post and Wade and Monaghan
* Waterford City Council and a Worker


1. An Post and Wade and Monaghan (FTC/12/20, Determination No. FTD 1231, 21st September 2012).

The basic facts were not in dispute in this case. The claimants were two fixed-term employees employed from October 2008 to September 2011 as temporary cover for permanent employees on short term absence. Due to reorganisation of the respondent’s business, both were dismissed on grounds of redundancy and paid statutory redundancy lump sum when their final fixed-term contract came to an end. There was no dispute that a genuine redundancy situation existed. However, the claimants argued that as fixed term employees, they were treated less favourably than two permanent colleagues whose employment also ended in circumstances of redundancy but who had been able to avail of An Post’s Voluntary Severance/Voluntary Early Retirement (VS/VER) schemes.

In summary, the terms of these schemes allowed for eight weeks pay per year of service for an employee made redundant who has between one and five years service, subject to a minimum payment of 20 weeks and a maximum payment of 40 weeks. The trade union on behalf of the claimants had sought payment under this scheme but this was refused. In a subsequent claim, a Rights Commissioner (RC) found in the claimant’s favour and directed that the terms of the scheme should apply to them.

An Post appealed this finding to the Labour Court. In effect, its principal argument was that if the Court found that there was a basic (or prima facie) case of discrimination, there was an objective justification for such less favourable treatment. For this purpose, it argued that the VS/VER scheme was introduced to act an incentive for permanent staff to opt for redundancy in a situation where staff numbers may need to be cut. Such an incentive was required for permanent staff as they have security of tenure in their jobs until retirement and might otherwise not be inclined to do so. Fixed-term employees on the other hand because of the temporary nature of their employment did not need to be incentivised and their redundancies were compulsory as opposed to the voluntary redundancy of permanent employees availing of the scheme.

The Court first considered whether redundancy constitutes pay so as to come within the terms of Section 6 prohibiting less favourable treatment of fixed-term employees in relation to their conditions of employment. Having examined existing case law, in particular the recent decision of the High Court in University College v Bushin [2012] IEHC, which followed a number of other cases on the question, it decided that it did.

On the question of objective justification, it noted that Section 7 of the Act in turn provides that that a ground put forward by an employer to justify less favourable treatment shall not be regarded as an objective ground unless it is based on considerations other than the status of the employee concerned as a fixed-term employee. It further noted that the essence of An Post’s justification in this case was that because the comparators were permanent employees, it considered it necessary to provide a financial incentive for them to leave.

On the other hand, because the claimants were fixed-term employees, it considered it unnecessary to pay them anything beyond statutory entitlements. Thus, the Court reasoned that the consideration relied upon by An Post to justify less favourable treatment in this case could not be dissociated from the claimants’ status as fixed-term employees. As a result, it could not be relied upon as an objective ground for the purpose of justifying less favourable treatment. An Post’s appeal was therefore dismissed and the RC’s decision affirmed.
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2. Waterford City Council and a Worker (FTC/12/13, Determination No FTD 1235, 11th October 2012).

This case again concerned an appeal by a respondent employer against a decision of a Rights Commissioner (RC) which found in favour of the claimant employee. The claimant commenced employment as a Resident Engineer (Civil) with the respondent on August 16th 2006 on a fixed purpose contract. Clause 3 of this contract stated that the claimant’s employment was for the purposes of ‘Phase II of the Waterford Main Drainage Scheme’. Clause 5 in turn provided that the claimant’s employment would cease ‘on the date of issue of Certificate of Substantial Completion of the Design Build Operate (Contract 5)’. The expected duration of the contract was to be two years and the contract was confirmed by a ‘Manager’s Order’ in keeping with local authority practice. Further developments of note in this case included the following:

* The completion of the project was delayed and another Manager’s Order of 12/10/2009 extended the claimant’s employment to 1/2/2010

* A further Manager’s Order of 25/1/2010 extended his employment to 30/7/2010. This was accompanied by a letter titled ‘Re Extension of Contract

* On 21/7/2010, the ‘Certificate of Substantial Completion’ referred to in Clause 5 of the original contract was issued

* On the same date - 21/7/2010 – a further Manager’s Order stated that on the recommendation of the Senior Engineer, the complainant was to continue as Resident Engineer until 30/10/2010, subject to the satisfactory performance of his duties

* A final Manager’s Order of 21/10/2010 continued the claimant’s employment until 31/1/2011 when his employment finally came to an end.

In the course of the appeal, it was argued on behalf of the claimant that the fixed purpose contract clearly provided at Clause 5 that it would come to an end when the Certificate of Substantial Completion was issued. This was duly issued on 21st July 2010. A subsequent Manager’s Order then renewed the contract verbally to October 30th, 2010 and this brought the claimant’s employment beyond the four year limit (it having commenced on 16/8/2006) on what was now a series of two fixed purpose contracts. Further, the second contract did not set out any objective grounds to justify the renewal of the first contract. The claimant was thus entitled to a contract of indefinite duration under the terms of Section 9.

The respondent argued that in reality the claimant’s employment was subject to a single contract throughout its currency. This was shown by Clause 3 of the contract which stated that its purpose was to undertake work associated with Phase II of the Waterford Drainage Scheme. Managerial Orders that were issued merely continued this contract, it was never renewed. Thus Section 9 and the right to a contract of indefinite duration did not apply. In the alternative, the respondent argued that it had an objective justification for renewing the contract. The Senior Engineer had recommended the continuation of the claimant’s employment linked to the main drainage scheme. Even after the Certificate of Substantial Completion was issued, there were outstanding works to be completed and these were matters that were intrinsically linked to that scheme. The respondent produced documentation to show that this work did not form part of the fixed and permanent needs of its operation. Thus, in summary, a further fixed term contract was justified and was an appropriate and necessary measure from the respondent’s perspective.

In reaching its conclusions in this case, the Court began by accepting that if the respondent was correct in its view that only one fixed purpose contract was ever in place, then Section 9 did not apply and there would be no right to a contract of indefinite duration. However, the Court then proceeded to reject this argument in finding that Clause 3 of the contract, which the respondent had relied upon, had merely defined the purpose for which the claimant was being employed. It did not specify the objective condition by which the duration of the contract would be determined, a matter dealt with in Clause 5. That clause ‘plainly and unambiguously’ provided that the claimant’s employment would cease on the date of issue of a Certificate of Substantial Completion.

The Court was therefore satisfied that the first contract came to an end when that certificate was issued and the claimants contract was renewed pursuant to the Managers Order of the same date, 21st July 2010. This renewal purported to extend the duration of the claimant’s employment beyond the four year period permitted by Section 9 of the Act and the contract as renewed became, in principle, one of indefinite duration by operation of law.

It then fell to the Court therefore to determine whether the respondent had an objective justification for the renewal. For this purpose, the respondent produced the internal memoranda from the Senior Engineer to the Human Resources Manager setting out the reasons for each extension of the claimant’s employment. These were designed to show that the work which the claimant was employed to perform was essentially temporary and transient in nature and did not meet a fixed and permanent need of the respondent.

However, the Court noted that the claimant had never received any of this documentation. Counsel for the claimant also emphasised that none of the documents relied upon made any mention of objective grounds for the various extensions or renewal of his fixed-term employment. She also argued that the respondent had failed to comply with its obligations under Section 8 of the Act to inform the claimant at the time of the renewal of his contract of the objective grounds justifying the renewal and the reasons for not offering a contract of indefinite duration.

The Court analysed the relevant case law and statutory provisions at some length before deciding that an employer must commit itself, at the point at which a fixed-term contract is being renewed, to the objective grounds upon which it will rely should it have to defend a claim under the Act. In this case, the respondent never explained to the claimant why his fixed-term contract was being renewed or why he was not being offered a contract of indefinite duration. The Court concluded that this was because the respondent was seeking to retrospectively justify the renewal of the claimant’s fixed term employment (while continuing to deny that there was any such renewal) on grounds that were never advanced at the material time. It determined that this approach could not be accepted and dismissed the respondent’s appeal.

Previous emails on the subject of claims under the fixed term legislation have emphasised the technical nature of this area and the dangers that lurk as a result and this bears repeating. However, it is worth noting that had the Certificate of Substantial Completion not been issued by the respondent in this case, perhaps prematurely, there may have been a different outcome or indeed no claim brought at all.
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