The successive use of fixed-term employment contracts may sometimes be justified and is permissible, the European Court of Justice has recently ruled. However, the use of such contracts could be subject to scrutiny by the national authorities in order to ensure that there is no abuse.
EU employment laws are based on the premise that contracts of indefinite duration are the norm when it comes to employment- Mariosa Vella Cardona
EU employment laws are based on the premise that contracts of indefinite duration are the norm when it comes to employment. In order to ensure this, EU law obliges member states to adopt measures aimed at preventing any abusive use of successive fixed-term employment contracts. An employer must show that there are objective reasons which justify the renewal of a definite contract.
This particular case dealt with the transposition of the EU law dealing with fixed term contracts into German law. In terms of German law, the temporary replacement of an employee who is on maternity or parental leave constitutes an objective reason for successively employing a person on a fixed term contract. Where no objective reason exists for renewing a fixed-term employment contract, German law provides that the contract becomes one of indefinite duration.
An employee was employed for a period of 11 years on the basis of a total of 13 fixed-term employment contracts. These contracts were always concluded in order to replace other employees employed for an indefinite duration and who were on temporary leave such as parental leave. The employee maintained that her last employment contract had become a contract of indefinite duration. She argued that a total of 13 fixed-term employment contracts concluded successively and without interruption over a period of 11 years could not be deemed to be justified by a temporary need for replacement staff. The national court which took cognisance of the case made a preliminary reference to the European Court of Justice requesting guidance as to the interpretation of the relevant provisions of EU law.
The ECJ declared that a temporary need for replacement staff, as provided for under German law, may, in principle, constitute a legitimate objective reason justifying the conclusion of fixed-term contracts with replacement staff and the renewal of such contracts. The mere fact that an employer employs temporary replacements under a definite contract on a recurring, or even permanent, basis, even though the employer could well have opted to employ someone on a contract of indefinite duration, does not automatically mean that the employer is acting in an illegal or abusive manner.
The court noted that to oblige employers to enter automatically into contracts of indefinite duration, when such employer is faced with a recurring need to find replacement staff due to the size of the entity or the composition of its personnel would go beyond the objectives pursued by EU law. The court remarked that, in such cases, EU law grants both member states and the social partners an amount of discretion. However, the court highlighted the fact that in assessing, on a case-by-case basis, whether the renewal of a fixed-term contract is justified by an objective reason, the national authorities must take account of all the circumstances of the case, including the number and cumulative duration of the fixed-term contracts concluded in the past with the same employer.
In terms of Maltese law a fixed term contract can be successively renewed up to a maximum period of four years after which the employee must be considered to be employed under a contract of indefinite duration. This is not the case however when the employer has justifiable reasons for retaining the employee on a fixed term contract.
The ruling of the ECJ has thrown light on what could be considered as a “justifiable reason” for retaining an employee on successive definite contracts. Employers must note, however, that the court has not given them a carte blanche to make use of such contracts in any way they desire. Indeed, the above judgment has made it clear that national authorities must in all cases scrutinise the successive use of such definite contracts by an employer in order to curtail any abuse.
mariosa@vellacardona.com
Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is the deputy chairman of the Malta Competition and Consumer Affairs Authority as well as a member of the National Commission for the Promotion of Equality.