Lower termination payments for fixed-term employees not unlawful

A Spanish law which provided for fixed-term employees to receive lower termination payments than permanent employees was not unlawful.    

Facts

In Montero Mateos, the European Court of Justice (ECJ) considered whether a Spanish law which provided for fixed-term workers to receive lower termination payments than permanent workers was unlawful.  

Decision

The ECJ ruled that this was not unlawful.  Higher payments for permanent workers were justified because termination was not foreseen at the outset.  Termination therefore frustrated the worker’s legitimate expectation of stable employment. The ECJ noted that a fixed-term worker dismissed before the expiry of the fixed term was entitled to the same compensation as a permanent employee. The difference in treatment was therefore justified.  

Implications

In the UK, an employment tribunal ruled in Hart v Secretary of State for Education and Skills that failure to pay enhanced redundancy payments to fixed-term employees dismissed on the expiry of their fixed-term contracts was unlawful under the Fixed-Term Employees Regulations 2002.  It rejected an argument that the difference in treatment was justified because the fixed-term employees had no expectation of job security.  However, in that case, the employees had been employed on a series of fixed-term contracts that had been renewed on a number of occasions, which may explain why the employment tribunal considered that the difference in treatment was not justified. As an employment tribunal decision, it is not binding.

As a result of the ECJ’s decision, there may be some scope for excluding fixed-term employees from receiving enhanced redundancy payments but the circumstances are likely to be limited and legal advice should always be sought.