Fixed-Term Employment Contracts Mean What They Say – Guideline Ruling

Fixed-term employment contracts mean what they say and expire at the end of their terms without the need for any notice of termination. The Court of Appeal so ruled in a case which clarified the interrelationship between fixed-term contracts and public sector collective agreements.

The case concerned a teacher who was taken on to work at a primary school under the terms of an engagement letter from the headteacher which specified a date, 12 months’ hence, when her employment would terminate. Seven weeks before the contract was due to expire, she was informed that it would not be renewed or extended.

After she lodged proceedings, an Employment Tribunal (ET) found that the so-called Burgundy Book – a collective agreement between various trade unions and the Local Government Association – was incorporated into her contract. In awarding her about £3,000 in compensation, the ET found that, in accordance with the Burgundy Book, she was entitled to three months’ notice of termination, running from the date on which she was notified that she would not be kept on. That decision was, however, subsequently overturned by the Employment Appeal Tribunal (EAT).

In dismissing the teacher’s challenge to that outcome, the Court noted that the engagement letter expressly stated in unambiguous terms that her contract was for a fixed term and would expire on a particular date. It was of the essence of such a contract that it came to an end on the specified date by simple effluxion of time and that she was not entitled to any notice of termination.

The Court observed that employees on fixed-term contracts may understandably wish to know well in advance whether they are to be renewed or extended. That would no doubt accord with good practice, but there was no justification for building a formal notice obligation into the teacher’s contract, in the absence of which her employment would presumably be deemed to continue indefinitely.

Her case depended on the proposition that the clear effect of the engagement letter had been modified – indeed effectively reversed – by a provision in the Burgundy Book requiring that teachers should receive a minimum of two months’ notice and, in the summer term, three months. The ET’s decision had the effect of wholly changing the nature of the contract, transforming it from a fixed-term contract to a contract terminable only on notice.

In the absence of the contract having been modified by agreement, such a result was impermissible. The Court found that the relevant provision of the Burgundy Book only applied to permanent contracts, that is contracts terminable on notice. It was not intended to apply to fixed-term contracts where notice is not required in the first place.