Department for Work and Pensions v Webley

On 18 March 2003, the respondent to this appeal, Mrs. Atasha Webley, issued a form IT1 in the Employment Tribunal at Stratford in East London. Her complaint was that the appellant, the Department of Work and Pensions (the Department) had discriminated against her as a fixed-term employee by treating her less favourably than a comparable permanent employee, in breach of regulation 3(1)(a) or 3(1)(b) of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the regulations). The less favourable treatment alleged by Mrs. Webley was the termination of her employment before a period of 52 weeks had elapsed. This has been referred to throughout the argument as “ the 51 week rule”.

In its form IT3 the Department stated that; (1) it was not required under the regulations to convert a fixed-term contract into a permanent contract; (2) the fact that Mrs. Webley had been employed under a fixed-term contract did not involve less favourable treatment as regards the terms of her contract under regulations 3(1)(a); and (3) the expiry of a fixed term contract did not involve subjecting Mrs. Webley to a detriment within regulation 3(1)(b).

There is no dispute on the facts, and the case accordingly raises a pure point of law, which was heard as a preliminary issue by Mr. Ian Lamb, a regional chairman of Employment Tribunals sitting alone at Stratford on 27 October 2003. In his reserved decision, promulgated on 11 November 2003, Mr. Lamb formulated the issue in the following terms:

For reasons, which will become apparent, I think it unfortunate that the preliminary issue was phrased in this particular way. In any event, it has provoked a difference of opinion. Mr. Lamb answered the question in the negative, and dismissed Mrs. Webley’s claim. Mrs. Webley appealed to the Employment Appeal Tribunal (EAT) and on 24 March 2004, HH Judge Peter Clark, sitting alone, allowed her appeal. He laid an emphasis on the word “capable” in Mr. Lamb’s question, and answered it: “ ‘Yes’ or possibly ‘it depends’”. He accordingly set aside Mr Lamb’s decision and directed that Mrs. Webley’s application proceed to a full merits hearing before a differently chaired three member Employment Tribunal.

The Department now appeals to this court, pursuant to permission given by Mummery LJ on 13 May 2004.

Mrs. Webley was employed by the Department from 4 February 2002 until 17 January 2003 as an administrative officer on a series of short, fixed-term contracts. Mrs. Webley worked at the Leyton Job Centre. She undertook what she describes as general administrative duties. In particular she matched jobseekers with interviews for work. There is no suggestion that she carried out her work in anything other than a competent and conscientious fashion.

We have Mrs. Webley’s appointment letter in our papers. It is dated 7 March 2002. It describes the post being offered to Mrs. Webley as “a short-term temporary (non-permanent) appointment from 4 February 2002 to 3 May 2002”, a period of three months. The appointment is expressed as having been made under Article 6(1)(a) of the Civil Service Order in Council 1995 (the Order in Council). This permits an exception to the general rule contained in Article 2(1)(a) of the Order in Council that appointments in the Civil Service must be made “on merit on the basis of fair and open competition”. The exception is permitted in cases where “the total period of service does not exceed five years and the appointment is justified by the needs of the Service”. I will return to the terms of the Order in Council later in this judgment.

Mrs. Webley’s appointment letter also says: -

In the event, Mrs. Webley’s appointment was extended beyond the initial three-month term. However, by letter dated 10 December 2002, the Department informed Mrs. Webley that: -

The appointment was not, however, extended, and Mrs. Webley's appointment came to an end on 17 January 2003.

Mrs. Webley formulates her complaint in her form IT1 in the following way: -

It is, I think, important to note that the only act of less favourable treatment amounting to discrimination alleged by Mrs. Webley is the fact that her contract was terminated at / not renewed after 51 weeks. Furthermore, before us, her case was argued exclusively under regulation 3(1)(b) and not under regulation 3(1)(a). It is to the regulations, therefore, that I now turn.

The regulations were made pursuant to section 45 of the Employment Act 2002 (the 2002 Act) and are the domestic implementation of the European Union Council Directive 99/70 of 28 June 1999 concerning the framework agreement on fixed-term work. The framework agreement recognises that some people will be employed on fixed-term contracts, rather than contracts of indefinite duration. It is an important element of the Department’s argument in the instant case (and not, I think, disputed on Mrs. Webley’s behalf) that there is nothing of itself unlawful about such fixed term employment contracts. This is made clear by paragraphs 6, 7 and 8 of the General Considerations within the framework agreement itself. On this point, it is, I think, necessary only to refer to paragraph 8, which states that “fixed–term employment contracts are a feature of employment in certain sectors, occupations and activities which can suit both employers and workers”.

The purpose of the Directive, expressed in broad terms, is twofold. Firstly, it is to ensure that during the currency of fixed-term contracts, fixed-term employees should not be treated less favourably than comparable permanent employees. Secondly, it is to ensure that employees are not abused by employers using successive fixed-term contracts. These two objectives find expression in clause 1 of the framework agreement, which states: -

Section 45 of the 2002 Act requires the Secretary of State to make regulations to ensure that fixed-term employees are not subject to less favourable treatment (section 45(1)(a)); and to prevent abuse arising from the use of successive periods of fixed-term employment (section 45(1)(b)).

A fixed term contract is defined by regulation 1(2) as

Part 2 of the regulations is headed RIGHTS AND REMEDIES. Regulation 3 is headed Less favourable treatment of fixed term employees. The relevant provisions of regulation 3 for present purposes are the following:

Regulation 6 set out provisions against victimisation, and regulation 7 gives the employee the right to apply to an employment tribunal. Regulation 8 deals with successive fixed-term contracts and provides that contracts purporting to be fixed-term contracts, but which have been renewed and extend over a total period of 4 years, are to be treated as contracts of indefinite or permanent duration, unless continued employment on a fixed-term contract is objectively justifiable.

Mr. Lamb accepted the Department’s submission that: -

Mr. Lamb accordingly upheld the Department’s objection and dismissed the claim.

In the EAT Judge Peter Clark plainly did not think that the case should have proceeded by way of a preliminary issue. He began his judgment by stating:

This approach led Judge Clark to re-define what he described as “the real issues between the parties in a series of six questions. These were: -

Judge Clark did not attempt to resolve the issues he had raised, but contrasted them with the preliminary issue as identified by Mr. Lamb. He then turned to the principal submission made on behalf of the Department: -

Before us, Miss Elizabeth Slade QC and Mr. Clive Lewis, for the Department, went straight to what they submitted was the critical point in the case, and which had succeeded before Mr. Lamb but had been rejected by Judge Clark. It was common ground, they argued, that Mrs. Webley’s employment on a fixed-term contract was lawful. It followed that if the less favourable treatment was that asserted by Mrs. Webley, then the only way it could be addressed was to remove the limit on the duration of the fixed-term contract. In other words, the only way of eliminating the discrimination would be to convert the fixed-term contract into an indefinite or non-time limited contract. That, however, would involve the abolition of fixed-term contracts. It was, Miss Slade submitted, perfectly clear that neither the regulations nor the Directive sought to abolish the distinction between fixed-term work and permanent work, but only to eliminate differential treatment during the currency of a fixed-term contract.

Miss Slade submitted further that Judge Clark had fallen into error (a) by redefining the preliminary issue, notably in posing an erroneous question (3) (set out in paragraph 22 of this judgment); and (b) by failing in paragraph 19 of his judgment to address the submission from the Department which he had identified in paragraph 18.

Furthermore, they argued, Judge Clark had not addressed the preliminary issue in the context in which it had been addressed to him. He had misled himself by his reference to Whiffen’s case, where the issue was one of indirect sex discrimination. What the preliminary issue in the instant case was designed to address was the situation where the only act of less favourable treatment alleged was the failure / refusal of the employer to extend or renew the contract. The question was: could that alone amount to less favourable treatment within regulation 3(1)(a) or (b)? By interpreting the preliminary issue by reference to hypothetical facts; by importing concepts of sex discrimination; and by emphasising the word “capable”, Judge Clark had misinterpreted the issue, and had imported into it irrelevant features unrelated to a proper construction of regulation 3(1)(b) as applied to the facts of this case.

Miss Slade further pointed out that the Department’s policy in employing certain persons on fixed-term contracts was governed by the Order in Council and the Civil Service Commissioners Recruitment Code (the Code). Both were lawful and in accord with the regulations. The 51-week rule for fixed-term employees was perfectly proper. In so far as it might be argued that it had the consequence of preventing fixed-term employees from claiming before the Employment Tribunal that their dismissal had been unfair within Part X of the Employment Rights Act 1996 (ERA 1996) because they would not have been continuously employed for a period of a year (ERA 1996 section 108(1)), Miss Slade pointed out that the same consideration applied to employees on permanent contracts who were dismissed before the end of the first year of their employment.

Faced with these formidable arguments, Mr John Hendy QC and Miss Melanie Tether countered that the Department’s failure to extend or renew Mrs. Webley’s contract was dictated by its adherence to the 51-week rule, which operated despite the fact that the Department had a continuing need for Mrs. Webley’s services. This was demonstrated by the fact that the Department was continuing to engage other short-term employees at the very time Mrs. Webley was coming to the end of her fixed term. The decision not to extend / renew her contract of employment resulted in Mrs. Webley’s dismissal. That, they argued, was plainly “an act, or deliberate failure to act” within regulation 3(1)(b). Mrs. Webley thereby suffered a detriment – she was dismissed.

The plain purpose of the 51 week rule, they submitted, was to prevent short-term employees obtaining rights, such as the right to claim unfair dismissal under Part X of ERA 1996, for which the threshold of one year’s continuous employment (to which I have already referred) was required. The 51 week rule was not applied to permanent employees: Mrs. Webley was thus deprived of the opportunity to be offered further employment under further fixed-term contracts when there was plainly a need for her services. A permanent employee whose services were still required would not have been dismissed after a total of 51 weeks’ service.

In these circumstances, Judge Clark had been right to hold that the failure to renew a fixed-term contract when it expires was capable of constituting less favourable treatment. Were it otherwise, fixed term employees would have no effective protection from being dismissed by their employers in circumstances in which a permanent employee would not be dismissed.

Reliance was placed by Mr. Hendy and Miss Tether on the decision of this court in Whiffen’s case. Mrs. Whiffen was a teacher who had been teaching at a school for five and a half years under a series of fixed-term contracts. The school made redundancies, and did not renew her contract. It adopted a policy of dispensing with the services of teachers on fixed term contracts before embarking on a redundancy selection process. Mrs. Whiffen made a complaint of indirect discrimination under the Sex Discrimination Act 1975. She asserted that the need to be a permanent employee in order to enter the redundancy pool discriminated against women, since the proportion of women who could comply with the condition was considerably smaller than the number of men who could comply. That argument succeeded in this court.

By analogy, Mr. Hendy and Miss Tether argued that if the Department’s construction of regulation 3(1)(b) was correct, Mrs. Whiffen would have no remedy under the regulations, since the school’s discriminatory redundancy policy took effect through a decision not to renew her fixed-term contract after it had expired.

Mr. Hendy and Miss Tether referred us to a document published by the Department of Trade and Industry entitled: Fixed-term work – a guide to the regulations. They recognised, as indeed the Foreword to the guide recognises, that the booklet did not have statutory force and gave general guidance only. The passage on which they nonetheless relied stated: -

Mr. Hendy also took us to the decisions of the European Court of Justice (ECJ) and the House of Lords in Preston and others v Wolverhampton Healthcare NHS Trust [2001] 2 AC 415 and 455, and in particular to the ECJ’s affirmative answer at [2001] 2 AC 452-3 to a question posed to it by the House of Lords as to whether or not community law precluded a procedural rule which required an employee engaged on a series of short term contracts to make a claim for membership of an occupational pension scheme within six months of the end of each contract of employment to which the claim related, where there had been a stable relationship resulting from a succession of such short term contracts. This demonstrated, it was argued, that successive intermittent contracts of employment could give rise to a stable employment relationship. I did not understand this latter point to be contentious.

Moderately and skilfully as the arguments for Mrs. Webley were advanced, there is, in my judgment, simply no answer to the submissions advanced by Miss Slade and Mr. Lewis. In my judgment, those arguments are determinative of this appeal.

Mrs. Webley had – inevitably and properly - accepted in her counsel’s skeleton argument for this appeal, that it was not her case that the Department was obliged to convert her contract into a permanent contract; nor was she complaining about that fact that she was employed on a fixed term contract. Once it is accepted, as it must be, that fixed-term contracts are not only lawful, but are recognised in the Preamble to the Directive as responding, “in certain circumstances, to the needs of both employers and workers”, it seems to me inexorably to follow that the termination of such a contract by the simple effluxion of time cannot, of itself, constitute less favourable treatment by comparison with a permanent employee. It is of the essence of a fixed-term contract that it comes to an end at the expiry of the fixed-term. Thus unless it can be said that that entering into a fixed-term contract is of itself less favourable treatment, the expiry of a fixed term contract resulting in the dismissal of the fixed-term employee cannot, in my judgment, be said to fall within regulation 3(1).

Similarly, the fact that the termination of the contract by effluxion of time results in the dismissal of the fixed-term employee cannot, of itself, represent a detriment within regulation 3(1)(b). The same argument applies. The termination of the contract is an inevitable consequence of it being for a fixed term.

In my judgment, the regulations achieve the two purposes identified by the Directive. They establish the principle of non-discrimination and the need to protect the fixed-term employee from the abusive use of a succession of fixed-term contracts. It cannot, I think, be suggested that the Department is guilty in any way of abusing the system by applying a policy of 51 weeks maximum employment for fixed-term workers. It is, in my judgment, able to justify that policy by reference to both the Order in Council and the Code.

The principle set out in paragraph 2 of the Order in Council is that as a general rule, and except as expressly provided in the Order, nobody is to be appointed to a situation in the Civil Service unless:

The Code, however, recognises that there need to be exceptions to the general policy, and the question of short-term appointments is addressed in paragraph 2.7 to 2.13 of the Code. Paragraph 2.7 reads: -

In my judgment, there is nothing in the Civil Service recruitment policy, which is either unlawful or irrational, nor did I understand Mr. Hendy to argue to the contrary. Critical to it is the fact that there are the two types of contract. Mr Hendy and Miss Tether were, in my judgment right, in the light of the Policy document, and the commitment to open competition for permanent posts, to eschew any suggestion that the detriment Mrs. Webley suffered was the inability to convert her fixed-term contract into a permanent contract. Both contracts have their place, but they are distinct.

The threshold for abuse comprising the successive use of fixed-term contracts has been set by the regulations at four years – see regulation 8. Mr. Hendy was unable to identify any magic in that term, but equally was constrained to accept that - for example – a dismissal taking place at the conclusion of a contract of employment lasting 3 years and 11 months would be lawful, although the employee would, of course, by then have been employed for a sufficient period to have the right to apply to an Employment Tribunal claiming that the dismissal was unfair. By like token, however, it seems to me that there can be nothing unlawful about the 51-week rule.

If the policy behind the use of fixed-term contracts is lawful, therefore, and if the contracts themselves are lawful – as they plainly are, of what can any less favourable treatment within regulation 3 comprise? Mr. Hendy did not seek to bring Mrs. Webley within regulation 3(1)(a), and rightly so. The phrase “the terms of his contract” within regulation 3(1)(a) are plainly designed to deal with what Miss Slade agreed could be described as “nuts and bolts” – the day-to-day working conditions identified at considerable length in the letter of engagement dated 7 March 2002.

So one returns to regulation 3(1)(b), and to the same point. If the only act of which Mrs. Webley can complain is that the Department has failed or refused to extend the term of her contract beyond 11 months, there can, for the reasons I have already given, be only one answer to the question posed in the preliminary issue formulated by Mr. Lamb. That answer to that omnibus question must be “no”.

With great respect to Judge Clark, who is very experienced in this field, what it seems to me he has done is to import into the terms of the preliminary issue as identified in relation to regulation 3(1) arguments relating to other forms of discrimination. Whiffen in my judgment, does not assist Mrs. Webley. It was not a case under regulation 3(1)(b): it was a case of indirect sex discrimination. The question for decision in the instant case is not whether or not the termination or refusal to extend a fixed-term contract is capable of constituting an act of sex or race discrimination. The question is whether the termination or refusal to renew of itself is capable of constituting less favourable treatment under regulation 3(1)(b). Judge Clark, it seems to me, asked himself the wrong question: alternatively, by emphasising the word “capable” he took his eye off the ball and forgot that he was dealing exclusively with regulation 3 as applied to the undisputed and limited facts of this case.

In these circumstances, it might have been preferable if the preliminary issue had been formulated either by reference to the facts of this case, or by the insertion of words such as “where the only matter of which the applicant complains is that her employer has refused to renew or extend her fixed-term contract ……”.

Be that as it may, however, I am in no doubt that Mr. Lamb reached the right conclusion. I would therefore allow the appeal and dismiss the originating application.

I agree.

I also agree.