Universities have traditionally employed a significant number of employees (both academic and non-academic) on Fixed Term Contracts (FTCs). This is often to align with research funding for a particular role or grant. At the end of the fixed term, if further funding can be sourced the contract will often be renewed. FTCs are used in other circumstances, for instance where there is finite funding, for a specific project/task, maternity or sick leave cover.

Whether or not the non-renewal of a FTC triggers collective consultation obligations has been an issue of considerable interest, debate and concern for a number of years within Universities.

Legal background

The collective redundancy obligations under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRA) are triggered where:

“an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less”. (TULRA s188(1))

The question under consideration in the present case was whether the non-renewal of a Fixed Term Contract at the point at which it had been accepted it would end was a dismissal by reason of redundancy.

The definition of what amounts to a redundancy in terms of TULRA is different from the definition that applies to individuals or small scale redundancies contained in s139 of the Employment Rights Act 1996 (ERA). The TULRA definition derives from the European Collective Redundancies Directive (and is arguably much wider that the ERA definition).

TULRA s195 defines redundancy for those collective consultation purposes as follows:

“…references to dismissal as redundant are references to dismissals for a reason not related to the individual concerned or for a number of reasons all of which are not so related. “

It follows that there will be a redundancy for collective purposes in any situation in which termination arises for reasons which are not directly related to the worker as an individual. This will accordingly include the termination of employees as a consequence of reorganisation or restructuring, change in contractual terms etc.

It should be remembered that Article 2(a) of the current European Directive 98/59 provided that the collective redundancy scheme shall not apply to FTCs unless those contracts are brought to an end prematurely.

If the obligation to collectively consult is triggered and the employer does not comply with their obligations to collectively consult then that may result in a fine and up to 90 days gross pay for each affected employee. Therefore getting this wrong can be very expensive indeed.

UCU, the academic trade union, brought a protective award complaint against the University of Stirling on the basis that more than 20 Fixed Term Contracts (mainly researchers) had not been renewed in a 20 day period and as a result, UCU argued, the TULRA obligations had been triggered. Anderson Strathern represented the University in the Employment Tribunal and Employment Appeal Tribunal at which the University argued a point that had not been, as far as we are aware, before the UK courts previously, which was that the non-renewal of a fixed term contact was personal to that individual and therefore did not trigger the collective consultation obligations.

The University put forward four test cases covering the circumstances in which FTCs were most commonly used within Universities – finite funding, specific project/task, end of maternity and sick leave cover.

The Employment Appeal Tribunal agreed with the University.

EAT Judge Lady Smith said that in this case at least one of the reasons for the dismissals in each of the test cases was that the employee had agreed to a FTC, accepting that it would come to an end at a particular date or on the occurrence of a particular event. Unlike employees employed under an open ended contract, they did not have any reasonable expectation of employment for an indefinite period. It follows that since the reason for the four dismissals related to the individuals concerned, they were excluded by s195 of TULRA from the ambit of s188.

Conclusion

This is an important decision, in particular within the Higher Education sector and re-sets the boundaries of collective consultation in respect to the non-renewal of FTCs. The non-renewal of a Fixed Term Contract may or may not be a redundancy dismissal. It will depend on the reasons the employer had for not renewing that contract. If one of the reasons for non-renewal is individual to that employee (and in this case it was as the employee had accepted that their employment would come to an end at a defined point) then that non- renewal does not count for collective redundancy purposes. Where the non-renewal is not personal (e.g. the shutting of a department or where it is brought to an end early) the non-renewal may amount to a redundancy if the reasons are not personal to the employee.

While not an issue in this case it is to be remembered that the non-renewal of a FTC is a dismissal. Therefore, for such a dismissal to be fair in terms of the ERA, an employer, where the employee has a year’s service or more, is required to have a fair reason for dismissal and to follow a fair process. Further, for some institutions there will be consideration as to whether or not statutes or ordinances are triggered in the non-renewal of FTCs for academic staff.

To view a copy of the decision please click here.

Further information

For further information please contact Alun Thomas, partner, Barry Nichol, senior associate, or your usual contact within the Employment and Pensions Unit.

This bulletin is for general information only and does not constitute legal, investment or other professional advice. Please contact us should you require advice on any particular legal issue. Anderson Strathern LLP accepts no responsibility for any loss that may arise if reliance is placed on any information or opinions expressed in this bulletin.