The Court of Appeal has considered the correct interpretation of provisions of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 which exclude work under certain training and work experience schemes from the calculation of the period of successive fixed terms.
The Regulations provide that once an employee has worked for four years on successive fixed term contracts, he or she becomes a permanent employee, and is entitled to a declaration to that effect – which is what Mrs Hudson sought in her claim against the Department of Work and Pensions. She had been taken on in 2006 by the DWP as part of the New Deal (an excluded scheme under the Regulations), to get work experience, an arrangement which was originally for a one year fixed term, but was twice extended by a further year. When it expired, she was kept on for another year, with arrangements being made to help her broaden her experience and improve her job prospects. She then secured a further job with the DWP in open competition, which was not, this time, a training role.
The question was whether, once the employee was in a non-excluded position, previous training posts could be counted towards her successive fixed terms, or whether the wording of the Regulations meant that they should be permanently left out of the reckoning. The majority of the Court of Appeal took the latter view, and as Lord Justice Elias pointed out, if that were not the meaning of the exclusion, it would have the unfair result of discouraging employers who offer exempt training scheme contracts from offering further contracts at the end of training. However, I take the view that the preferred analysis can be found in the dissenting judgment of Dame Janet Smith
You might be forgiven for thinking that there is some skewed logic being applied in the majority decision, particularly with reference to the words "Prevention of Less Favourable Treatment" in the title of the Regulations. Is it really that much of a burden for employers that have, in one capacity or another, had someone working for them for four years, to have that contract effectively turned into a permanent contract? Is it really a disincentive to offers of training for employers to be concerned that after four years contracts might be treated as permanent? Is it really the function of the Court to offer what is, effectively a political and social analysis of what might not have been meant by an exclusion in Regulations?
Further, there are those (me included) who might see it as ironic that Regulation 18 provides that:
These Regulations shall not have effect in relation to a fixed term employee who is employed on a scheme, designed to provide him with training or work experience for the purpose of assisting him to seek or obtain work, which is either (a) provided to him under arrangements made by the Government, or (b) funded in whole or in part by an institution of the European Community.
It is notable that Lord Justices Maurice Kay and Elias took the view that the exclusion was effective but, in a dissenting judgment, Dame Janet Smith disagreed. She dealt with the key points as follows:
32. Regulation 18(1) provides that the regulations shall not have effect to a fixed-term employee who is employed on a scheme contract. I agree with Maurice Kay LJ that that means the regulations as a whole. It means that any person who is employed on a scheme contract falls outside the scope of these regulations. But at the time of her application Mrs Hudson was not employed on a scheme contract and in my view is not excluded from reliance on the regulations. I think that the point is a simple as that.
33. It is said that the true effect of Regulation 18 is that any scheme contract is to be excluded from consideration under the regulations; the period such a scheme contract covered should not count towards the total of four years required under Regulation 8(2)(a). But, that is not what Regulation 18 says. Regulation 18 is concerned to exclude a person (a fixed term employee) not a period of time. The regulation excludes a fixed term employee who is employed on a scheme contract. It does not refer to any past contracts. If Parliament had intended that any past fixed term contracts which had been scheme contracts should not count towards the qualifying period of 4 years, it would have been easy to say so. All Parliament appears to me to have done under Regulation 18 is to prevent persons who are currently employed on scheme contracts from taking advantage of the Regulations. But, in my view, if an employee comes within Regulation 8(1)(a) because he or she is currently employed on a fixed term contract which is not excluded by regulation 18 because it is a scheme contract, he or she can take advantage of the regulations and can rely on previous contracts (with the same employer of course) which were scheme contracts to build up his or her four year requirement.
34. Maurice Kay LJ does not suggest that this result gives rise to absurdity. It may be said that it does not appear to be expected that a person who is employed on scheme contracts for 3.5 years and is then employed on a non-scheme contract should be able to apply for a declaration that she is a permanent employee only six months after the commencement of the non-scheme contract. But it is not absurd. An employer who has sufficient regard for an employee that, after 3.5 years experience of her under a scheme contract is willing to take her on under a non-scheme fixed-term contract is not seriously disadvantaged if that person is able to count those earlier contracts towards the four year requirement. In any event, the employer may well be able to justify the use of the further fixed term contract after the scheme contracts have ended. I would think that such circumstances are fairly rare; scheme contracts will usually run for only a year or two. The facts here (3.5 years of scheme contracts) were said to be most unusual. As I said, this interpretation gives rise to no absurdity but possibly to an unexpected result in unusual factual circumstances.
On the question of disincentive to an employer, she continues and concludes:
36. Nor, with respect, do I agree with Maurice Kay’s second supporting reason. I do not think that the construction I have proposed would operate as a disincentive to employers to take on employees under scheme contracts. Scheme contracts are intended to be a short term arrangement, usually lasting one or two years. Mrs Hudson’s position was exceptional. So, most employers who contemplate taking on an employee under a scheme contract will in fact bring the relationship to an end after one or two years. If the employer decides to take on the employee under a non-scheme fixed term contract (possibly to see how the employee gets on working without the degree of supervision which would normally apply under a scheme contract), the employer would still have time and opportunity to bring the relationship to an end and would not find himself suddenly ‘saddled’ with a permanent employee he did not want. Provided that the employer keeps the employee’s position under review, there can be no disincentive to scheme contracts.
37. In short, I consider that the words of Regulation 18 are clear. They simply exclude for the regulations employees who are currently employed on a fixed term scheme contract. They have no other effect.