New Directive set to improve rights of fixed-term contract workers

The adoption of a Directive implementing the the European social partners' framework agreement on the rights of workers on fixed-term contracts is pending in summer 1999. We take this opportunity to review some key features of the agreement and look at a recently study of regulation on fixed-term contracts in Europe.

On 14 January 1999, the central European-level social partners - the Union of Industrial and Employers' Confederations of Europe (UNICE), the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) and the European Trade Union Confederation (ETUC) - reached a draft framework agreement on the rights of workers on fixed-term contracts (EU9901147F). The text was officially signed on 18 March 1999, after ratification by the statutory bodies of the three organisations (EU9903162N).

The background to the agreement was that, with "non-standard "forms of employment becoming more common in the 1980s and 1990s, the European Commission and the European labour movement were increasingly concerned to create a European framework of legislation to protect the rights of workers on "atypical" contracts. Draft Directives proposed by the Commission sought to provide for minimum employment rights for all workers on such contracts. However, successive proposals failed to gain approval in the Council of Ministers and in September 1995, the Commission initiated consultations with the European-level social partners on the rights of workers in atypical forms of employment. As UNICE was reluctant to debate the issues of part-time and fixed-term employment together, the social partners decided, in 1996, initially to negotiate on part-time work under the mechanisms then set out in the social policy Agreement annexed to the Maastricht Treaty on European Union. These talks led to the signing of the framework agreement on part-time work in June 1997 (EU9706131F). UNICE then declared its willingness to enter into negotiations on fixed-term contracts (EU9802183F), and the talks eventually led to the agreement signed in March 1999.

The social partners asked the Commission to present their agreement to the Council for implementation across the Member States through a Directive under Article 4(2) of the social policy Agreement. Following assessments, the Commission adopted its Proposal for a Council Directive concerning the framework agreement on fixed-term work concluded by UNICE, CEEP and the ETUC (COM(1999)203 final) on 1 May 1999. With the Amsterdam Treaty coming into force on 1 May 1999, the Agreement on social policy has been incorporated into the body of the EC Treaty as Articles 136-139. The legal basis of the draft Directive is thus Article 139(2), which provides that "agreements concluded at Community level shall be implemented, in matters covered by Article 137, at the joint request of the signatory parties, by a Council decision on a proposal from the Commission." The fixed-term work agreement relates to working conditions, which come under Article 137(1) of the Treaty.

Although Article 139(2) of the Treaty does not provide for consultation with the European Parliament on requests addressed to the Commission by the social partners, the Commission stated that it had kept the Parliament informed about the various phases of consultation which led to the agreement. The proposal was thus forwarded to the European Parliament, the Economic and Social Committee and the Committee of the Regions to allow them to deliver their opinion. At its meeting on 25 May 1999 (EU9906178F), the Labour and Social Affairs Council of Ministers warmly welcomed the draft Directive, though formal adoption could not take place before the expiry of a newly introduced six-week period during which national parliaments can examine proposed Community legislation. When a decision is taken in Council, qualified majority voting will apply to the proposal.

Key features of the agreement

The stated purpose of the framework agreement on the rights of workers on fixed-term contracts is to improve the quality of fixed-term contract work by ensuring the application of the principle of non-discrimination, and to establish a framework to prevent the abuse of such employment relationships through the use of successive fixed-term contracts.

In its analysis of the deal, ETUC welcomes what it sees as the implication of the agreement (in its general considerations) that fixed-term contract work is to remain an exception in the labour market. UNICE, on the other hand was keen to stress that fixed-term contracts were a feature of certain sectors, occupations and activities and could suit both employers and workers.

In clause 2, which defines the scope of the agreement, UNICE had reportedly initially been keen to exclude individuals undergoing vocational training activities on fixed-term contracts from the agreement. However, ETUC objected to such a formulation. The final text allows Member States, after consultation with the social partners, not to apply the agreement to those in initial vocational training relationships and apprenticeship schemes and those on specific publicly supported training programmes.

Clause 4 provides for the general principle of non-discrimination in employment conditions to be applied to fixed-term contract workers. It also contains the principle that no additional length-of-service requirements for access to particular conditions, other than those existing for those on open-ended contracts, should be applied to fixed-term contract workers, except for those which can be justified on objective grounds.

Clause 5 calls upon Member States to introduce - "where there are no equivalent legal measures to prevent abuse" - one or more of the following measures:

  • objective reasons justifying the renewal of such contracts or relationships;
  • a maximum duration of successive fixed-term employment contracts or relationships; or
  • the number of renewals of such contracts or relationships.

The parties reportedly recognise that the term "where there are no equivalent legal measure to prevent abuse" will be open to interpretation at national level and ultimately by the European Court of Justice. Nevertheless, ETUC considers clause 5 to constitute a negotiating victory for the European trade union movement.

Clause 6 obliges employer to inform fixed-term workers about vacancies which become available in the undertaking. UNICE reportedly rejected ETUC's demand to give fixed-term employees preferential access to such vacancies.

Mirroring currently legislative provision in at least nine of the 15 Member States, the agreement provides (in clause 7.1) for fixed-term contract workers to be taken into account when calculating workforce-size thresholds for the purposes of employee representation. Clause 7.3 states that "as far as possible, employers should give consideration to the provision of appropriate information to existing workers' representative bodies about fixed-term work in the undertaking." ETUC argues that information and consultation on these issues would in any case be covered by the current proposed Directive on national-level information and consultation (EU9812135F).

Overview of national regulations

The European Trade Union Institute conducted a study on the regulation of fixed-term contracts in the EU Member States and applicant countries, in preparation for negotiations on the issue.

The survey found that in the majority of countries, fixed-term contracts are regulated by legislation, except for the Nordic countries, where such forms of employment are governed by collective agreement. In the countries where legislation is in place, these provisions are completed by collective agreements at national, sectoral or company level. In a number of countries, individual contracts also provide for additional rights and benefits. In some Member States, separate legislation exists for specific groups of workers (such as seafarers or agricultural labourers).

Legislation was rarely found to contain a clear definition of fixed-term contract work. In some countries, a negative definition is applied - if a contract is not for an indefinite duration, it is considered a fixed-term contract. In other countries, legislation sets out the circumstances under which a fixed-term contract can be concluded. In the Czech Republic, Slovak Republic and Poland, legislation exists which states that fixed-term contracts may not be concluded with certain categories of persons (eg school leavers, young persons, disabled persons, and other categories defined in collective agreements). In a number of countries (such as Belgium) authorisation is required from the public authorities before a fixed-term contract can be renewed.

The survey found that in the majority of countries, fixed-term contract workers had to be supplied with written particulars setting out a certain number of obligatory provisions ( name of the fixed-term contract workers, nature of the work, grounds on which the contract was concluded, duration, remuneration etc). If these requirements are breached, a claim can generally be made for the employment relationship to be converted into one of unlimited duration. However, the survey found that labour inspectorates often do not give priority to breaches of this nature. In some countries, contracts of a very short (specified) duration do not have to be supplied in writing.

The reasons for which a fixed-term contract can be conclude vary significantly from country to country and are either laid out in legislation or case law. A survey by the European Foundation for the Improvement of Living and Working Conditions, carried out in 1992, placed countries into three categories, depending on the level of regulation in relation to unfair dismissal and fixed-term contracts:

  • countries with comparatively little protection against unfair dismissal and few restrictions with regard to fixed-term contracts (eg UK, Ireland and Denmark);
  • countries with relatively high protection against unfair dismissal and few restrictions concerning the use of fixed-term contracts (eg Germany and the Netherlands); and
  • countries with a high level of protection against unfair dismissal and restrictive legislation with regard to fixed-term contracts (eg Belgium and Italy).

The Foundation survey also distinguished between "traditional" and "new" reasons justifying the conclusion of a fixed-term contract. Traditional reasons relate to either the foreseeable seasonal nature of the work or the temporary absence of a member of staff due to sickness or maternity leave. The new reasons quoted, and which were not held to be legal in every Member State, included:

  • where a company is uncertain of future workloads and workers are hired for a temporary increase in demand or emergency work;
  • where there is a need for a longer probation period;
  • where employment law makes it difficult or expensive to lay off redundant staff; and
  • where active labour market policy creates the opportunity to recruit certain groups of workers on a temporary basis because of the perceived benefit of offering them work experience and/or vocational training.

A number of countries expressly prohibit the use of fixed-term contracts to replace workers on strike, or to carry out work in an enterprise which has recently implemented collective redundancies in order to carry out restructuring.

According to the ETUI survey, terms of the permissible duration of fixed-term contracts, there are countries where no maximum duration is specified (eg Austria, Greece, Ireland, Italy, Netherlands, Czech Republic and Poland); while other countries provide for a general maximum duration (eg France, Luxembourg, Portugal, Spain and the Slovak Republic); and others still set down a maximum duration for specific situations/categories of workers (eg Belgium, Germany, Sweden, Finland and Norway).

A future key feature of fixed-term contract regulation is the number of times, or the circumstances in which, a fixed-term contract can be renewed. A number of countries were identified in the survey, which - although not providing for a maximum duration for fixed-term contracts - do limit the number of renewals in general or for specific situations (eg Austria and Greece). Other countries provide for both a maximum duration and limit the number of times a fixed-term contract can be renewed (eg France, Luxembourg, Portugal, Spain and the Slovak Republic). In Ireland and the UK, no such limits are stipulated. Where the limit on the renewal of fixed-term contracts is breached, most countries provide for such contracts to become open-ended ones.

A fixed-term contract generally terminates on the expiry of its term. Prior termination often needs to be justified on "serious grounds" or to take place by mutual agreement. Some countries foresee that compensation must be paid if the contract is terminated prior to the agreed period. In the UK and Ireland, a temporary worker can waive his or her rights to complain against unfair dismissal. Some countries provide that a certain period should elapse before the employer can hire a new fixed-term contract worker for the same job as was previously carried out by a fixed-term contract worker.

In terms of individual rights, all countries provide that, in principle, fixed-term contract worker should enjoy the same rights as their colleagues on open-ended contracts. However, most countries operate numerous length-of-service requirements in relation to rights to claim unfair dismissal, redundancy pay, social security rights, pension entitlements and so on. Studies have also shown that temporary workers only tend to have limited access to training opportunities. In most countries, they have no right to be informed about vacant posts for which they may be eligible to apply.

In terms of collective rights, fixed-term contract workers are often not allowed to participate in any strike action and in many countries are not eligible to stand for, or vote in elections for employee representative bodies. In several countries, it is a requirement that employee representative bodies are informed, on a regular basis, of the use of fixed-term contract work.

The ETUI survey finally sought to gather figures on the prevalence of fixed-term contract employment. This type of employment relationship was found to be most prevalent in Spain, where 35% of contracts were fixed term. In Austria, Belgium, Luxembourg, Italy, the Czech Republic and the UK, fixed-term employment made up less than 10% of employment relationships. In Denmark, France, Germany, Greece, Ireland, the Netherlands, Portugal, Sweden, Finland and Norway, this figure was 10%-15%.

Commentary

The new Directive, once adopted by the Council of Ministers and transposed at national level, is set to bring improvements in the rights of fixed-term contract workers in a significant number of Member States. Nevertheless, a number of issues remain open to national-level interpretation and further interpretation through case law (Tina Weber, ECOTEC Research and Consulting).

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