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Unfair Dismissal on the expiry of a Fixed Term Contract

Will the decision not to renew a fixed-term contract necessarily be fair provided you have not acted in a discriminatory manner?

In Royal Surrey County NHS Foundation Trust v Drzymala the Employment Appeal Tribunal held that it would not; a dismissal could be unfair even where an employer has complied with the Fixed-term Employees Regulations.

What is the law?

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations provide that, in the absence of objective justification, there must not be less favourable treatment of staff employed on fixed-term contracts, than comparable permanent staff. 

Further, the non-renewal of a fixed term contract amounts to a dismissal in law.  Accordingly, employees engaged under a fixed term contract, who have the necessary two years continuity of service, benefit from protection from being unfairly dismissed under the Employment Rights Act 1996.  For a dismissal to be fair it must be for one of the potentially fair reasons set out in the Act and you must also have acted reasonably in dismissing the employee for that reason. 

Where an employee is dismissed at the expiry of their fixed-term contract, the dismissal will be potentially fair under the Act for ‘Some Other Substantial Reason’. However, you will still need to show that, in all the circumstances, the dismissal was fair. 

What happened in this case?

The claimant, a doctor, was employed as a locum consultant on a series of fixed-term contracts with the NHS Trust.  A permanent vacancy arose before her contract was due to expire, which she applied for.  She was interviewed, along with another candidate, but was later informed that she was unsuccessful.  In the conversation that followed, the Claimant was told that, in the future, there may be other substantive roles, potentially as a Specialty Doctor, although this would have been a lower ranking position than the Claimant’s then Locum Consultant post. 

The Trust subsequently decided not to renew the Claimant’s fixed term contract, and served her with a letter giving notice to this effect.  The letter made no mention of a right of appeal, nor of any possible alternative employment with the Trust, although she was offered a meeting “to talk about this matter” if she wished. 

The Claimant submitted a formal grievance which made various complaints.  Although a grievance meeting was held, the process was not concluded until after the Claimant’s employment ended.  Over a month after her employment ended, the Trust wrote to the Claimant confirming that she had a right of appeal.  She subsequently wrote a letter of appeal raising various issues.  The only point which was upheld was that the letter giving notice should have included an offer of a right of appeal.  However, the Trust went on to state that, in any event, an earlier appeal would have made no substantive difference to the outcome. 

What was the Employment Tribunal decision?

Where the reason for a dismissal is the expiry of a fixed-term contract, it is well settled that this can constitute “some other substantial reason” for the dismissal (although it can also sometimes amount to redundancy).  The fairness of the dismissal is then considered in the normal way. 

The Tribunal was concerned by two issues in relation to the Claimant’s dismissal: (1) the lack of discussion around alternative roles for the Claimant; and (2) the Claimant was denied the right to appeal the decision to dismiss her. 

Subsequently, the Tribunal concluded that the dismissal was unfair.  It was not enough that the Trust had complied with the Regulations in dismissing the Claimant; it still had to comply with the requirement for fairness under the Act.

EAT’s judgment

The Trust appealed to the Employment Appeal Tribunal. It relied on the fact that it had complied with the Regulations and had not discriminated against the Claimant on the grounds of her fixed-term status. However, the appeal was rejected.  The EAT agreed with the Employment Tribunal’s view that a dismissal would not necessarily be fair just because the employer has complied with the provisions of the Regulations.

The EAT went on to clarify that while an employer is not required to raise the question of alternative employment every time a fixed-term contract expires, fairness will often dictate that alternative roles should be searched for and discussed with the individual. In the present case, the Trust engaged in such discussions but withdrew from this dialogue at an early stage. The Employment Tribunal had been entitled to find that, on the facts of this particular case, the Trust had not gone to adequate lengths to explore alternative roles with the individual. 

What does this mean for me?

This case emphasises that the Regulations and the Act impose separate obligations on employers. Satisfying the former will not necessarily satisfy the latter.  Therefore, where you are seeking to not renew a fixed-term contract, you must ensure that, not only do you  comply with the Regulations, but also that the dismissal is fair in accordance with the Act. 

In addition, while there is no general obligation on an employer to discuss alternative employment every time a fixed-term contract is due to expire, such discussions evidently play an important role in determining whether the dismissal was fair. In many cases, a failure to engage with a member of staff to explore alternative roles may result in a finding of unfair dismissal. Consider the facts and circumstances of your particular case carefully and seek legal advice if you unsure of the best approach.

Ben Daniel is Head of Employment, Pensions and Immigration at Weightmans LLP and is based in Leeds. If you have any questions please do not hesitate to contact Ben or speak to your usual Weightmans advisor.