Employers should not rely blindly on unfair dismissal exclusion clause in fixed-term contracts
One of the key advantages to employers in using fixed-term contracts is the availability of an exclusion from the protections of the Unfair Dismissals Acts 1977-2015 on the expiry of a fixed-term contract.
However, an important decision of the Labour Court in 2018 highlighted the need for employers to understand the limits of any such exclusion prior to terminating an employee’s contract of employment.
Section 2(2)(b) of the Unfair Dismissals Acts provides that the Unfair Dismissals Acts will not apply to a dismissal of a fixed-term/specified purpose employee provided that the fixed-term or specified purpose contract:
- is in writing;
- is signed by both the employee and the employer; and
- provides that the Unfair Dismissals Acts do not apply to a dismissal consisting “only” of the expiry of the fixed-term or the cesser of the specified purpose.
If any of the above conditions are not met, the exclusion will not be valid, and the Unfair Dismissals Acts will apply to the termination of the employee’s employment, provided that the employee meets the period of service requirement, if any.
In Limerick City and County Council v Moran, the employer was unsuccessful in seeking to rely on the exclusion from the Unfair Dismissals Acts contained in Mr Moran’s one year fixed-term contract.
The Court dealt with whether or not the Council could rely on the exclusion clause in Mr Moran’s contract as a preliminary issue.
On the face of the contract, all three of the above criteria were satisfied, and Mr Moran’s employment had been terminated on the date on which the fixed-term expired. However, Mr Moran argued that the termination of his fixed-term contract related to factors other than the expiry of the term of the contract, and the Unfair Dismissals Acts therefore applied to his dismissal.
Evidence was put forward by Mr Moran, and accepted by the Council, that the fixed-term contracts of five other workers similarly employed by the Council at the same time as Mr Moran were renewed. Mr Moran’s contract was the only contract that was not renewed on the expiry of the term. The Council had in fact engaged in a performance review process with Mr Moran throughout his employment. Significantly, the Council went on to concede to the Court that if Mr Moran had not been engaged in a performance review process, he would have been retained beyond the date of expiry of his fixed-term contract.
As a result, the Court noted that the Council accepted Mr Moran’s involvement in the performance review process “was in fact the determining factor in the non-renewal or extension” of his contract. On the basis that the expiry of the fixed-term of the contract was not the “only” reason for Mr Moran’s dismissal, the exclusion set out in section 2(2)(b) of the Unfair Dismissals Acts did not apply.
The Court proceeded to determine whether or not Mr Moran’s dismissal was in breach of the Unfair Dismissals Acts. The Court noted that the procedure for dealing with employee performance was set out in the contract of employment and had not been followed by the Council. Mr Moran’s dismissal was therefore procedurally unfair and in breach of the Unfair Dismissals Acts and he was awarded €5,000 in compensation which equated to just over six weeks’ remuneration.
The case clearly illustrates the limits of the exclusion under the Unfair Dismissals Acts and the importance of an employer complying with its own policies and procedures when dismissing a fixed-term/specified purpose employee for any reason other than the expiry of the fixed term/specified purpose of their contract.