Changes to fixed term (definite term) employment contracts

On 22 February 2016, an amendment to the Labour Code on definite period employment contracts will come into force. This amendment will introduce new rules allowing an employer to conclude no more than three contracts for a definite period with the same employee, for a combined period of no longer than 33 months (the so called: “3/33” rule).

Importantly, employers must bear in mind that this change is partly retrospective in effect since contracts concluded with an employee before 22 February 2016 will be recognised as the first or the second contract for a definite period. However, the period of 33 months will not start to run until 22 February.

Exceptions

If, once this amendment is in force, a fourth contract for a definite period (including any contract extensions) is entered into or the period of employment under one or more such contracts exceeds 33 months then, by operation of law, the employee becomes permanent. An exception applies for contracts concluded:

  • for the purpose of covering absence,
  • for performance of casual or seasonal work,
  • for performance of work during a term of office,
  • if the employer can demonstrate objective reasons on its part justifying a contract for a longer definite period.

For an employer to be able to rely upon any of the exceptions described above, the purpose or the circumstances justifying the use of the exception will have to be stated in the employment contract. Moreover, in case of the last exception (ie reliance upon objective reasons), the regional labour inspector must be notified in writing or in electronic form within 5 days of conclusion of such contract.

To a large extent the first exception, permitting replacement hires, will simply replace existing provision in the Labour Code concerning employment contracts for the replacement of absent employees, a provision which is to be withdrawn on 22 February 2016 as the new exceptions are brought in. As a result, employers will still be able to replace absent employees with definite term contracts as needed, notwithstanding the changes and the “3/33” rule.

In contrast, the ability of an employer to rely upon the exception based on objective reasons is less clear cut. Whilst, due to its nature, this may well prove the exception upon which employers seek to rely most frequently, there is currently no clear indication of what these “objective reasons on the part of the employer” might entail. As a result, clarification of the meaning of this phrase and its implications in practice will need to await decisions of labour inspectors and of the labour courts in individual cases in due course.

What employers should do now

Employers who have pre-existing definite term contracts with employees (ie contracts which commenced prior to 22 February 2016) will have three months from that date (ie until 22 May 2016) to introduce the required statements of exception into those contracts, if they intend to rely upon any of the exceptions to the “3/33” rule.

In addition, those employers with such pre-existing contacts but who believe they can establish objective reasons on their part as to why they satisfy that particular basis for avoiding the “3/33” rule will need to notify the regional labour inspector in writing or in electronic form within 5 days.