Fixed-term employment contracts – risk of abuse?

In two recent cases, the ECJ has ruled on the framework for renewal of fixed-term employment contracts.

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According to the Act on Fixed-Term Employment and the underlying EU Directive, successive renewals of fixed-term employment contracts are, as a general rule, only lawful if such renewal is based on objective conditions.

The first case, which had been referred by an Italian court, concerned an academic researcher who was employed at a university for a three-year period. His employment contract was subsequently extended by two years, after which he was refused another renewal as Italian law does not allow for such renewal. The researcher believed it was contrary to the Directive on fixed-term employment that he, according to Italian law, was prevented from obtaining employment of indefinite duration.

National limits on duration may be OK
The ECJ stated that the Directive on fixed-term employment does not preclude national legislation which, in respect of university researchers, sets a limit of three years on fixed-term employment contracts with a single possibility of extension for a period of two years.

The ECJ also established that, in this situation, it is not necessary for the legislation to define objective and transparent criteria enabling a review of the conclusion and renewal of the employment contracts as well as the existence of proportionality.

According to the ECJ, such legislation does not give rise to a risk of abuse of fixed-term employment contracts since, on the contrary, the measures limit the possibilities of extending and renewing fixed-term employment contracts and thus prevent abuse.

Variable time limits do not hold
The other case, which had been referred by a Spanish court, concerned a so-called ”auxiliary employee” in the hotel and catering industry. She was employed as a temporary worker on a fixed-term employment contract, as the employer was waiting for the position to be filled permanently. The employer dismissed the auxiliary employee after 16 years of employment, as the position she held was assigned to a permanent employee.

National legislation in Spain did set a time limit of three years for recruitment processes but, according to case law, this time limit could be extended for various reasons.

According to the ECJ, the time limit was thus variable and uncertain, allowing the renewal of fixed-term contracts in breach of the Directive. In addition, the time limit did not ensure that recruitment processes were actually carried out and was therefore not directly suitable to prevent abuse. However, the final assessment of this was for the national court to make.

Finally, the ECJ ruled that purely economic considerations in relation to the 2008 financial crisis cannot justify the absence in national law of measures preventing and sanctioning the use of successive fixed-term employment contracts.

Norrbom Vinding notes

  • that the judgments establish that limiting the duration as well as the number of fixed-term employment contracts may be allowed, provided there is no abuse of the rules on fixed-term employment contracts; but
  • that fixed-term contracts may not be unilaterally extended/renewed prior to final recruitment procedures for permanent positions without it being clear when the selection process for the permanent position will be conducted; and
  • that the financial crisis in 2008 cannot justify the absence of measures to prevent abuse of fixed-term employment contracts.

The content of the above is not, and should not be a substitute for legal advice.

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