Analysis

Fixed-term employment contracts

Fundamental changes in 2016

Legal alert (13/2015)

The amended Labor Code to enter into force in the first months of 2016 has been signed by the President. It lays down new rules governing the entry into and termination of fixed-term employment contracts, which may be of crucial importance to a number of employers in Poland.

The Act of 25 June 2015 amending the Labor Code and certain other acts, primarily aimed to impose limitations on unjustified use of fixed-term employment contracts, was signed by the President on 5 August 2015.

It should be published in the Journal of Laws by the end of August 2015.

Considering materiality of the changes introduced thereunder, a 6-month vacatio legis period has been introduced by the transitional provisions. This denotes that the amendments should enter into force in the first months of 2016.

The amended Labor Code may be of crucial importance to a number of employers in Poland as it modifies considerably the existing detailed rules governing the entry into and termination of fixed-term employment contracts.
 

Major changes introduced by the amended act:
 

1) Fixed-term employment contracts: limitations on the duration and number of contracts
As the labor law does not impose a time limit for fixed-term employment contracts at present, in practice some contracts are concluded for long periods (e.g. 5, 7 or 10 years).

Following the entry into force of the amended Labor Code, conclusion of long-term employment contracts will not be allowed. The legislator decided that fixed-term employment contracts may be concluded for the maximum period of 33 months. Also, the total employment period under several fixed-term employment contracts concluded by the same parties to the employment relationship may not exceed 33 months.

If such period is exceeded, the employee shall be deemed employed under an indefinite-term employment contract as of the first day following the expiry of the aforesaid time limit.

In practice, under the new legislation, the fixed period of employment may not exceed 3 years
(a 3-month trial period plus a 33-month fixed-term employment contract).

Another important change is that the employer may enter into up to three fixed-term employment contracts with one employee. If the fourth contract is concluded, the employee shall be deemed employed under an indefinite-term contract. It should be emphasized that from the perspective of the amended law the period between the conclusion of the consecutive fixed-term employment contracts is immaterial.

It is a major modification as compared to the laws in force, whereby the third fixed-term contract becomes an indefinite-term contract by virtue of the law but only if the intervals between the consecutive contracts do not exceed one month. Employers would evade the law by making such intervals longer than one month and, in fact, an unlimited number of fixed-term employment contracts could be concluded by the same parties. Following the entry into force of the amended act, such practice will no longer produce the desired effect as the length of the period between the consecutive fixed-term employment contracts will be immaterial.

The bill allows some exceptions to the aforementioned limitations on the time and number
of fixed-term employment contracts (to include contracts concluded to replace employees or to perform seasonal and temporary work, or those entered into for objective reasons on the part of the employer, which were considered controversial once they had been introduced).

 

2) Fixed-term employment contracts: changes in termination rules and notice period

Currently, a fixed-term employment contract may be terminated only if it has been concluded for a term of more than 6 months and contains appropriate provisions governing that issue. In such a case, the notice period under the Labor Code in force is two weeks, regardless of the period of employment.

This rule will also be modified considerably upon the entry into force of the amended Labor Code. First, it will be possible to terminate any fixed-term employment contract on notice, irrespective of the term for which it has been concluded and whether appropriate provisions have been set forth therein.

Second, the notice period for fixed-term employment contracts will be the same as that for indefinite-term contracts, i.e. from 2 weeks to 3 months, and it will be conditional on the length of service with a given employer.

What is important, despite the introduction of the same notice periods for fixed-term and indefinite-term employment contracts, the legislator did not impose the obligation to justify termination
of fixed-term contracts, as suggested by some lawyers.


3) Limitation on the number of employment contract types

Under the amended act, the number of employment contract types will be reduced to three:
• trial period employment contract;
• fixed-term employment contract; and
• indefinite-term employment contract.

Thus, contracts concluded for a period necessary to perform specific work will no longer be allowed and fixed-term contracts will be concluded instead.

What is more, there will be no separate regulations applicable to replacement contracts. As already mentioned, exclusions regarding the aforementioned limitations on the time and number are allowed with respect to fixed-term replacement contracts. However, longer notice periods will apply.


4) Fixed-term employment contracts: transitional provisions

The act sets forth detailed transitional provisions governing employment relationships under
fixed-term employment contracts and those concluded for a period necessary to perform specific work, which will be effective when the act enters into force.

Contracts concluded for a period necessary to perform specific work will be governed by the existing provisions, whereas the majority of fixed-term employment contracts which had been signed before the entry into force of the amended laws will be subject to the new provisions (with some exceptions allowed, though). At the same time, as a rule, the employment period determining the length of the notice period and the maximum period of employment under a fixed-term contract will be calculated as of the date when the amended act comes into effect. Similarly, a fixed-term employment contract effective at the time when the amendments enter into force will be deemed the first (or, in certain cases, the second) fixed-term employment contract under the new laws.

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The aforesaid changes may be of crucial importance to employers. First, the amended act may limit the use of fixed-term contracts in practice, especially by those enterprises which preferred contracts concluded for a term of three years or more. Additionally, the obligation to make notice periods conditional on the length of service with a given employer will extend the contract termination procedure.

As the amendments will apply to numerous employment relationships effective upon their entry into force, employers will have to consider how the new laws will affect their employment relationships under fixed-term contracts. Implementation of the amended provisions may exert a considerable effect on some of the existing employment relationships. For this reason, the legislator introduced an extended, 6-month vacatio legis period.

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