SECTION 15(1), PROTECTION OF EMPLOYEES (FIXED-TERM WORK) ACT, 2003
- AND -
90 NAMED COMPLAINANTS
(REPRESENTED BY SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION)
Chairman: Ms Jenkinson
Employer Member: Mr Doherty
Worker Member: Mr Nash
1. Appeal against Rights Commissioner's Decision R-035289-FT-05/TB.
2. The Employer appealed the Rights Commissioner's Decision to the Labour Court on the 11th April, 2006. A Labour Court hearing took place on the 24th October, 2006.
This is an appeal by the Health Service Executive against the Decision of a Rights Commissioner in a claim by the Union on behalf of 90 named Complainants under the Protection of Employees (Fixed-Term Work) Act 2003 (the Act). The Union claims that the Respondent contravened the Act when it issued contracts of indefinite duration to the Complainants, which have no specified minimum guaranteed hours of work.
The majority of the Complainants are employed by the HSE North Western Area as support workers in Donegal, Sligo and Leitrim. Prior to the enactment of the Act they were employed as and when needed. It is agreed by both parties that they were employed on a succession of fixed term contracts and that they became entitled to contracts of indefinite duration under Section 9 of the Act:
9. - (1) Subject to subsection (4), where on or after the passing of this Act a fixed-term employee completes or has completed his or her third year of continuous employment with his or her employer or associated employer, his or her fixed-term contract may be renewed by that employer on only one occasion and any such renewal shall be for a fixed term of no longer than one year.
(2) Subject to subsection (4), where after the passing of this Act a fixed-term employee is employed by his or her employer or associated employer on two or more continuous fixed-term contracts and the date of the first such contract is subsequent to the date on which this Act is passed, the aggregate duration of such contracts shall not exceed 4 years.
(3) Where any term of a fixed-term contract purports to contravene subsection (1) or (2) that term shall have no effect and the contract concerned shall be deemed to be a contract of indefinite duration.
Accordingly the HSE West furnished the Complainants with a document entitled “Permanent Contract of Employment for Relief Staff - If and When Required”.
This was not acceptable to the Union who held that in fact the Complainants were employed on the same terms as heretofore i.e. as and when required, and proceeded to submit a claim to the Rights Commissioner under section 14 of the Act.
The Rights Commissioner decided that the “If and When Required” contracts proposed by the HSE West were not contracts of indefinite duration as envisaged by the legislation and held that the HSE West should provide the Complainants with contracts of indefinite duration based on the normal weekly hours of each of the Complainants in the previous 12 months and to pay €1000 each in compensation.
HSE West appealed the Rights Commissioner’s decision under section 15 of the Act.
The grounds of appeal:
The “if and when required” contracts of indefinite duration are reflective of the Complainant’s previous pattern of employment within the various work locations.
The HSE West has fully complied with its legal obligations. The Complainants will be offered all available work. Such offers will be made indefinitely.
The nature of the Complainant’s work patterns within the various locations is to provide relief cover as the need arises, therefore, they do not have designated substantive posts.
The Complainant’s enjoy identical terms and conditions of employment (with the exception of contracted hours of attendance) as all other employees in their category.
The Employer’s arguments
HSE West denied that there was a breach of the legislation. It stated that the Complainant’s were not being treated less favourably than comparable permanent employees, they are provided with the same terms and conditions, other than their contracted hours of attendance.
As the Complainant’s are employed on “if and when required” (locum/relief) contracts, they do not have guaranteed hours of work or continuous employment, as HSE West cannot predict the level of exigencies which may arise. However, while they do not have designated substantative post, they are regarded as permanent employees. They have signed up to this arrangement and agreed to have their names placed on a list to provide cover when required. There is no obligation on the individual to make him/herself available at all times.
In order to comply with the requirement of the Act, they no longer are employed on fixed term contracts for each “stint” without a commitment for future employment. They are now offered contracts of indefinite duration, which more accurately reflects the reality of the working relationship, which has always existed. With the issuing of these new contracts, the Complainant’s will no longer have their employment terminated at the end of each “stint”. They will now have a formal expectation of future locum/relief work at it arises.
The Union’s arguments
The Union submitted that the Rights Commissioner’s Decision was correct and should be upheld by the Court.
It maintained that the proposed “if and when required” contracts do not comply with the provisions of the Act, as the Complainants would be treated less favourably than comparable permanent employees. The Union pointed out that the latter have contracts, which specify the minimum contracted hourly working week. It also submitted that there was no practical reason for the proposed contracts as there is sufficient work available, and many regularly work overtime hours - above 39-hour week.
The Union stated that when discussions commenced between the parties on ensuring compliance with the legislation, there were a small number who worked irregular or inconsistent hours; in these cases management had proposed contracted hours based on the average hours worked in the previous year. The Union confirmed that it was willing to agree to this arrangement. However, management had followed this up with the proposed disputed, “if and when required” contracts, thereby giving rise to the claim.
The Union submitted that the proposed contracts had not existed prior to the enforcement of the Act, and in its view were designed to minimise or neutralise the benefits of the Act for the Complainants.
Issues in dispute
There is no dispute between the parties that the Complainants, prior to the coming into force of the Act, were employed on a succession of fixed term contracts both as to purpose and term. Furthermore, there is no dispute that since the enactment of the Act the Complainants have all become entitled to contracts of indefinite duration.
Therefore the only issues for consideration by the Court is whether or not the proposed “if and when required” contracts of indefinite duration change the status of the workers from fixed term workers to that of permanent workers and fulfil the employer’s obligations under section 9 of the Act. If the status of the workers as fixed term workers remains unchanged it follows that their terms and conditions are less favourable than those of comparable workers on contracts of indefinite duration.
What is a contract?
It is accepted law that in order for a contract to exist there must be offer and acceptance, consideration and an intention to create a legal relationship. In employment contracts however a further term has also been held by the Courts to be necessary before an employment relationship can exist. This is mutuality of obligation, which covers elements of both offer and acceptance and consideration.
The proposed contract states at Page 1
Scope of employment:
“On the termination of any period of employment with the HSE any further employment offered to you shall be at the sole discretion of the HSE. Equally you will not be obliged to accept any offer of employment.”
One of the essential features of a contract of employment is “mutuality of obligation”, i.e. the obligation on the employing party to offer work and the obligation on the employed party to accept work.
Mutuality of obligation has been considered by the English Court in a number of instances and in particular by the House of Lords inCarmichael and another (applicants/Respondents) v. National Power plc (Respondents/appellants)  IRLR 43.
In that case, the CEGB invited applications ‘for the posts of station guides’. ‘Successful candidates’ would be required to: ‘Supervise parties of visitors on pre-selected tour routes around the power station site’; as well as explain and answer questions on the various parts of the plant; and give a short presentation about the CEGB and how electricity is made and transmitted. They were also to be given ‘full training’. The invitation continued:
‘Employment will be on a casual as required basis and payment will be at the rate of 376.56 pence per hour, being the minimum of Band I of the NJIC Agreement.’
The House of Lords stated at Paragraph 18 of their Judgment:
- "If this appeal turned exclusively – and in my judgment it does not – on the true meaning and effect of the documentation of March 1989, then I would hold as a matter of construction that no obligation on the National Power plc to provide casual work, nor on Mrs. Leese and Mrs. Carmichael to undertake it, was imposed. There would therefore be an absence of that irreducible minimum of mutual obligation necessary to create a contract of service (Nethermere (St Neots) Ltd v Gardiner  IRLR 240 per Stephenson LJ, and Clark v Oxfordshire Health Authority  IRLR 125, 128 per Sir Christopher Slade, at paragraph 22).(Clark)"
InClarkthe appellant was employed as what was known as a bank nurse by the Health Authority. She signed a lengthy document, which included a term to the effect that she was not a regular employee and had no entitlement to guarantee or continuous work. It was for the employing authority to determine in any one week whether a nurse shall be called in to work (if available) and the number of hours to be worked each day.’
A number of findings of fact were made:
The nurse bank was administered by the authority and supplied the services of bank nurses to a number of hospitals within its area. The applicant worked when required at any one of three hospitals.
The applicant had no fixed or regular hours of work. Bank nurses would be offered work as and when a temporary vacancy occurred and could be asked to fill any vacancy for which they were appropriately qualified and/or experienced. When she worked she was paid according to an hourly rate, her pay being subject to deduction of tax, national insurance and superannuation under PAYE. She had no entitlement to any pay when she did not work, and had no entitlement to holiday pay or sick leave.
Though the applicant said she never refused work, there was neither obligation upon her to accept work nor any obligation on the authority to offer her work.
If she was not offered work there was no action she could take to require the authority to offer her work.
She had no entitlement to any pay when she did not work and had no entitlement to holiday pay or sick leave.
Sir Christopher Slade stated:
- “A “contract of employment” within the meaning of the statutory definition cannot exist in the absence of mutual obligations subsisting over the entire duration of the relevant period. The decisions of the Court of Appeal in Nethermere (St Neots) Ltd v Gardiner  IRLR 240 and McLeod v Hellyer Brothers Ltd  IRLR 232 are binding authority for that proposition. Although the mutual obligations required to found a global contract of employment need not necessarily and in every case consist of obligations to provide and perform work, some mutuality of obligation is required. For example, an obligation by the one party to accept and do the work if offered and an obligation on the other party to pay a retainer during such periods as work was not offered would be likely to suffice.
In the present case, no such mutuality existed during the periods when the applicant was not occupied in a single engagement. The Authority was under no obligation to offer the applicant work nor was she under any obligation to accept it. She had no entitlement to any pay when she did not work and no entitlement to holiday pay or sick leave.
Accordingly, no global contract of employment between the Authority and the applicant was in existence at any time during the three years that she was a bank nurse.”
In Nethermere (St Neots) Ltd v Gardiner IRLR 240 CA (‘Nethermere’ Kerr LJ said at p.247, 38:
- ‘The inescapable requirement concerning the alleged employees however – as Mr. Jones expressly conceded before this court – is that they must be subject to an obligation to accept and perform some minimum, or at least reasonable, amount of work, for the alleged employer. If not, then no question of any “umbrella” contract can arise at all, let alone its possible classification as a contract of employment or of service. The issue is therefore whether the tribunal's findings and conclusions show that they took account of this essential requirement.’
This Court accepts the findings inClarkas a correct statement of the Law.
The Relevant Statutory Provisions
The Act states at Section 2 :
- “contract of employment” means a contract of service whether express or implied.
“fixed term employee” means a person having a contract of employment.
The purpose of the Framework Agreement is set out Clause 1 thereof as follows:
the purpose of this framework agreement is to:
Paragraph 2 of the Framework Agreement states:
- “This agreement applies to fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each member state.”
This Court must therefore consider whether the document produced to this Court and expressed to be a contract of employment of indefinite duration is in fact such a contract. Given that the contract expressly states that there is no obligation on the employer to offer work and the employee to accept it, this Court cannot see how there is the mutuality of obligation necessary to find that a contract of employment exists.
The essence of a contract of indefinite duration is that there is some element of continuity and that the obligations created by the contract subsist over the period of the contract. A document under which where there is no obligation to provide or accept work and where any obligations created under the document only apply to periods where such work is offered and accepted could not in the view of this Court be called a contract of indefinite duration. Indeed, following the decision inClark, it is not a contract of employment at all.
Section 9 (3) of the Act renders void any term of a fixed-term contract which purports to contravenesubsection (1) or (2).
The legal effect of subsection (3) was considered by the Court inKhan v North Eastern Health BoardDetermination No. FTD064 17 E.L.R. 313 where the Court held as follows:
- “Subsection 3 is of particular significance. That subsection applies to a situation where an employee is given a renewed fixed-term contract in contravention of subsections (1) or (2). In such a case subsection (3) would operate so as to render void,ab initio, the term of the contract which purports to provide for its expiry by effluxion of time, or the occurrence of an event. Hence, by operation of law, the offending term would be severed from the contract thus altering its character from one of definite duration, or fixed-term, to one of indefinite duration. However, the remaining terms and conditions of the contract would be unaffected including, as in the instant case, any express or implied terms relating to training or the attainment of qualifications.”
It is accepted by both parties that the Complainants are entitled to contracts of indefinite duration, by operation of law. For such contracts to exist there must be mutuality of obligation, i.e. HSE West must be obligated to offer work and the Complainant must be obligated to accept it.
In addition, while the term “contract of indefinite duration” is not defined by the Act, the Court is of the view that the terms of such a contract must have the same meaning as those applicable to a comparable permanent employee. This issue was considered by the Court inMcArdle v State Laboratory FTD063, this case dealt with,inter alia, a claim for the entitlement to the same tenure as an established civil servant:
- “… the expression “contract of indefinite duration” should be understood in contradistinction to a contract of definite duration or a fixed term contract. The terms and conditions of a contract of indefinite duration which comes into being by operation of Section 9(3) must therefore be the same as those contained in the fixed-term contract from which it is derived, as modified by Section 6, in all respects other than its fixed duration. Obviously, these terms will vary from one employment to another and every case will be decided mainly on its own facts.
In the Determination the Court adopted the following working definition of the term “contract of indefinite duration” which had been formulated by the Rights Commissioner, in so far as it related to the complainant’s entitlements to tenure: -
- “In the case of the Claimant she is a person who has an expectation that subject to the normal date of retirement in the employment, she will be retained in employment and will not be dismissed without there being any good reason such as misconduct or unfitness for her position, or other compelling or unavoidable circumstance. Any dismissal shall be achieved by the application of the relevant Statute as the case may be by reference to the comparable permanent employee, in this case, an established civil servant.”
On the authorities cited in this Determination the Court is satisfied that the legal and practical effect of the impugned “as and when required arrangements” would be to provide the Complainants with separate contracts of employment in respect of each period during which they undertake work on a relief or locum basis. As there is no subsisting obligation on the Respondent to offer work, or on the Complainants to accept work, between assignments no contractual relationship could exist between the parties during such periods. Hence, it seems clear to the Court that such an arrangement would, in effect, amount to the continued provision of a succession of fixed-term in contravention of Section 9 of the Act.
Normally the number of hours that must be worked is specified in a contract of employment bearing in mind that zero hours contracts are not permitted under the Organisation of Working Time Act 1997.
Equally, under the contract of employment an employer is obliged to pay the employee for the times of work during which he/she is prepared to work and which are laid down in the contract.
The Court finds that until such time as contracts of indefinite duration specifying a guaranteed number of working hours are put in place HSE West will continue to be in breach of their duties under the Act.
For all of the reasons set out herein the Court has reached the following determination:
The Complainants have become entitled to contracts of indefinite duration by operation of Section 9(3) of the Act. The said contracts must be on the same terms and conditions of employment, including terms as to working hours, as the fixed-term contracts from which they are derived. It follows that in order to meet its obligations under the Act the Respondent should provide each of the Complainants with a contract of indefinite duration specifying a number of normal weekly hours which is not less that those specified in their final fixed-term contract.
The Union indicated that there are a small number of Complainants whose weekly working hours varied. There is no clear guidance in the Act on the approach to adopt in these cases, other than that they are entitled to terms not less favourable than the terms which applied when they were last employed as fixed term employees unless alternative arrangements are agreed to. Therefore, the Court is of the view that the approach adopted by the Rights Commissioner would commend itself as being a practical approach in all the circumstances. Consequently, the Court concurs with the finding of the Rights Commissioner who decided that the Respondent should be required to provide these Complainants with contracts of indefinite duration based on their normal weekly hours in the previous 12 months.
Furthermore, the Complainants are entitled to the rules and procedures for the termination of their contract applicable to the termination of the contract of employment of a comparable permanent employee.
In addition, the Court upholds the Rights Commissioner’s Decision to award compensation of €1000 to each of the Complainants.
The Court so determines.
Signed on behalf of the Labour Court
16th January, 2007______________________
Enquiries concerning this Determination should be addressed to Madelon Geoghegan, Court Secretary.