Analysis

What is the future of the employment contract for a fixed term? 

Legal alert (4/2014)

The employment contract for a fixed term is a popular form of a job contract used in many sectors of the economy. The absence of any special requirements regulating this form of employment and the flexibility it offers the employer as compared to other types of employment contracts prescribed in the Labour Code makes it very popular among employers.

The employment contract for a fixed term is a popular form of a job contract used in many sectors of the economy. The absence of any special requirements regulating this form of employment and the flexibility it offers the employer as compared to other types of employment contracts prescribed in the Labour Code makes it very popular among employers.

What employers like about fixed-term employment contracts is that they expire upon the lapse of the term agreed by the parties, so there is no need for the employer to give the employee any termination notice, consult the trade unions, etc., which is always an additional burden for the employer.

If a fixed-term contract is concluded for over six months, a clause providing termination at two weeks’ notice can be included in the terms and conditions of the agreement, which is an obvious advantage for employers. The aforesaid clause allows the employer to terminate an employment contract before the expiry date without having to take the same formal steps (such as provide justification, consult the trade unions, use longer termination periods) that apply to employment contracts for an indefinite term, so there is no wonder employers are rather willing to use such a provision in their contracts.

However, this possibility so favoured by employers is set to change in the not-too-remote future. The basis for the change is the judgment of the EU Court of Justice in case No. C-38/13 of 13 March 2014 in which the Court examined compliance of Art. 33 of the Polish Labour Code (possibility of including a clause providing termination at two weeks’ notice in an employment contract) with provisions of Directive 99/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP.

One of the aims of the Directive is to ensure that “fixed-term employees are not treated in a less favourable manner than permanent workers solely because they have a fixed-term contract, unless the difference in treatment can be justified on objective grounds.”

In the aforesaid judgment the Court stated that using different termination periods for fixed-term and permanent employees under similar circumstances constitutes discriminatory treatment of employees which is in breach of the provisions of the Directive.

Even though the judgment of the Court itself does not render Article 33 of the Polish Labour Code invalid, comments from the Deputy Labour Minister and other officials in the media suggest that provisions on fixed-term employment contracts will most likely change.

Consequently, we should expect that the law on fixed-term employment contracts will undergo significant amendments before long. The main changes are likely to include imposition of the same terminations periods for fixed-term and permanent employment contracts (i.e. from two weeks to three months, depending on the employee’s length of service).

Furthermore, if we follow the logic of the Court’s ruling, we should also expect changes in the conditions of dismissals, as referred to by the Court, in addition to new notification period in fixed-term employment contracts. The amended provisions on to fixed-term employment contacts may include regulations similar to those in respect of permanent employment contracts. These may include in particular provisions requiring the employer to justify termination of an employment contract, consult the intention to terminate an employment contract with the trade unions or even give fixed-term and permanent employees the same right to seek claims for incorrect termination of an employment contract. Introduction of the aforesaid laws would revolutionise fixed-term employment rules.

As yet there are no specific proposals for new regulations resulting from the judgement of the Court. There is little doubt however that the provisions on fixed-term employment contracts will see some major changes soon, rendering this form of employment less attractive for employers. Above all else, we should expect reduction in the flexibility of such contracts. In practice, early termination of an employment agreement concluded for a definite term may turn out to be difficult once the amendments have come into effect.

As a side note, work is already underway in the Polish Parliament on the amended provisions of the Labour Code regarding fixed-term employment contracts submitted by the Democratic Left Alliance (SLD) on 26 February 2104. The draft law introduces a time limit for employment under a fixed-term agreement (24 months as a rule, 36 months under exceptional circumstances), reduces the permissibility of including early-termination clauses in fixed-term employment contracts (such clauses will be permissible only in agreements concluded for a term over 12 months) and changes the notification period in fixed-term employment contracts (two weeks or one month). All of the aforesaid shows that changes in the provisions of law on fixed-term employment contracts are just a matter of time.

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