Fixed terms contracts and the ‘4 year rule’

Lobo v University College London Hospitals NHS Foundation Trust [2024] EAT 91

In this case, the Employment Appeal Tribunal (“EAT”) held that the successive renewal of a locum consultant’s fixed-term contract over a period of more than four years was objectively justified and did not lead to permanent employment.

The Claimant was employed by the Respondent employer as a locum Consultant Breast Surgeon. She worked part time at 60% of full-time hours and by February 2020, she had been employed by the Trust under a series of fixed-term contracts for four years. At this point, the Claimant applied for a permanent “substantive Consultant Breast Surgeon” position but her application was unsuccessful.

The Claimant subsequently sought a declaration under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 ("FTR") that her employment had in fact become permanent after four years’ continuous service. She claimed that the Respondent’s refusal was not objectively justified, and “was a decision that was not taken in good faith”. Under the FTR, an employee employed under a series of fixed-term contracts for a period of four or more years may be entitled to be treated as a permanent employee unless there are ‘objective grounds’ that the ‘contract remains fixed-term’.

The Employment Tribunal (“ET”) rejected the claim on the grounds that the Claimant’s locum role and the “substantive Consultant Breast Surgeon” role were “sufficiently different roles that the new role was not a continuation of the Claimant's locum role”. Requirements such as wider managerial or governance work and carrying out job-planned formal teaching or research were duties expected from the substantive, and not the locum, role.

On appeal, the EAT agreed with the ET for the following reasons:

• the locum and substantive roles were genuinely different to each other;
• the Respondent’s decision to appoint an employee in a different role to the Claimant contextualised the renewal of the Claimant’s fixed-term contract i.e. “to ensure it continued to achieve its legitimate aim, of providing a safe, efficient, and fully functioning Breast Service, in the intervening period”; and
• by extending the Claimant’s fixed term contract, it fulfilled the Respondent’s time-limited need for such a locum role.

This case illustrates the importance of having a clear and objective justification for renewing fixed-term contracts, especially when there is a risk of creating an expectation of permanent employment. Employers should ensure that they can demonstrate how their business needs require the continued use of successive fixed-term contracts, review their fixed-term contracts regularly and consult with their fixed-term employee(s) about their status and prospects.