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Universities, fixed terms and redundancies

FTCs are well used in Higher Education. They can ensure that periods of employment match arrangements which impose deadlines on courses and research.

The case of University of Stirling v UCU concerned the impact of collective redundancy legislation on the ending of fixed term contracts (“FTCs”). FTCs are well used in Higher Education. They can ensure that periods of employment match funding and other arrangements which impose deadlines on courses and research. Although, logically, the termination of employment at the end of a fixed term might not appear to be a dismissal (rather a termination by agreement of the parties), the Employment Rights Act 1996 ensures that it is. 

This then gives rise to the question of whether a dismissal at the end of a fixed term is a redundancy. In many cases it will be, particularly for the purposes of the collective redundancy legislation which defines redundancy as “a reason for dismissal which is not related to the individual concerned or for a number of reasons all of which are not related.” So, where the reason for dismissal is a structural or organisational one then this very wide definition of redundancy will be met.    

For years, many universities had not taken account of the comings and goings of fixed term employees in their redundancy figures. This was successfully challenged by UCU in The University of Lancaster v UCU. Initially Stirling fared better but when the case ultimately reached the Supreme Court this year, the decision was the same as with the University of Lancaster; namely that dismissals on the end of a fixed term were dismissals which were not related to the individual concerned and so, should be taken in to account in the collective redundancy consultation legislation. As most readers will know, where an employer proposes to dismiss as redundant 20 or more employees from one establishment, within a period of 90 days or less then obligations to inform and consult with recognised trade unions (or other appropriate representatives) apply.   

These cases did of course cause a great deal of concern about how to put in place processes which would effectively capture all of the information about fixed term employees across complex organisations and then deal with a meaningful and compliant collective redundancy process on (probably) a rolling basis. The penalty for not complying with collective redundancy obligations are however potentially very significant indeed – up to 90 days pay per affected employee. Clearly, there is a considerable financial incentive to get the process right.

The Stirling decision will only be relevant to Stirling itself and any other universities (and other employers) who have had cases waiting in the wings for the outcome of this Supreme Court decision. In April 2013, new legislation came into effect which provided that FTCs would not need to be taken in to account in determining collective redundancy numbers, where the employments of those fixed term employees were coming to an end because of the expiry of the period of fixed time or completion of the specified event (i.e. at the end of the agreed fixed term.)

It is important to remember however:

  1. The proposal to dismiss an employee employed on a fixed term basis BEFORE the end of that fixed term would not fall within this new statutory exception.
  2. The end of a fixed term is still a dismissal under the Employment Rights Act 1996 and so employers will still need to ensure that there is a fair reason and fair process. If the reason for dismissal is redundancy, then individual consultation will be crucial.
  3. Not all terminations at the end of a fixed term are redundancies providing for a redundancy payment liability.