Fixed-term employment: Thank God for an about face!

What applied yesterday no longer applies today, and nobody knows whether what should apply tomorrow actually will. A similar situation can be seen regarding the regulation of fixed-term employment relationships, where recently the lower house approved what was cancelled only a short time ago.

Limiting successive fixed-term employment may have seemed like an excellent idea to legislators eighteen months ago when the amendment to the Labour Code was being prepared. In practice, however, it caused panic.

Last year’s amendment allowed a fixed-term employment contract to be entered into for up to three years with the possibility to extend the relationship only twice. Renewal was also to be understood as extension of the same employment terms. Any previous fixed-term employment contracts that ended more than three years ago were to be disregarded.

Cause for concern

On one hand, the 2012 amendment was welcomed as it increased the total length of a fixed-term employment contract to up to nine years instead of the previous two. However, because exceptions to the limitation of fixed-term contracts were annulled, many employers started to worry, particularly those in the construction and agriculture industries.

Employers were forced to consider whether they wanted to extend employment further, which would mean concluding an indefinite term employment agreement. In particular, they had to take into account potential claims by the employee (e.g. lost wage compensation or severance pay). This was a significant dilemma for employers who did not have long-term or year-round work but who did not want to lose good employees. Employers looking for workers to carry out tasks whose duration was not yet defined were also undoubtedly troubled by the three-year limit that, if exceeded, could considerably change the terms of the employment contract, especially if the contract were poorly designed.

For many industries, the option of waiting for three years to break the chain of employment in order to be able to enter into a new agreement for a fixed period was not realistic. The current legal regulation thus, without entirely reasonable grounds, often forces employers to terminate employment that both the employer and employee wish to preserve.

Exceptions make a comeback

Fortunately, an amendment appeared in late December / early January that sought to bring back the legal status existing before 1 January 2012. In principle, the bill allows a fixed-term employment contract to be extended without limitation and no longer disregards fixed-term contracts that ended more than three years ago; it also allows such contracts to be extended for a longer period of time. But only, in the words of the bill, “if grounds exist due to which it cannot justly be requested to conclude an employment relationship for a fixed period”. The MPs passed the amendment at the end of March.

The fly in the ointment, however, is that the “just grounds” are not specified in the amendment. Nevertheless, it can be assumed that they are the exceptions that were cancelled a year ago and are now being brought back to life, namely those relating to the seasonal character of the work, serious operational difficulties of the employer, or the special nature of the work. The operational point specifically, but also the rules for negotiating and repeating an employment relationship for a fixed term, the circle of relevant employees and other restricting conditions must once again be stipulated in a written agreement with a trade union or by an internal regulation if no trade unions are established at the employer.

We believe that the aim of the amendment will be accomplished, i.e. in the legislators’ words “to make the labour market more flexible and improve competitiveness”, which is almost literally an incentive for adopting the current wording without any further legislative somersaults.