The Employment Act 2002 received Royal Assent on July 8th 2002. While the main thrust of the Act is an extension of maternity rights, and the development of paternity and adoption leave, it also covers reform of the Employment Tribunals and the Employment Appeal Tribunal; and new procedures for dispute resolution. The Act is the vehicle for implementing the Government’s obligations under the EC Directive on Fixed-Term Work.

Although any measure which affects employment will have a knock-on effect on pensions, the most significant change for the pensions industry will be the Regulations made under section 45 of the Employment Act, concerning fixed-term employment. There are two sets of Regulations currently being laid before parliament: one under this section, The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 [PDF]; and one under section 19 of the Employment Relations Act 1999, The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002 [PDF].

The Fixed-Term Regulations have been made to transpose the EC Fixed-Term Work Directive into UK legislation. The Directive should have been implemented by 10th July 2001. The Government extended the time until 10th July 2002, but even so neither the Fixed-Term Regulations, nor the Part-Time Workers Amending Regulations will come into force until 1st October 2002.

Summary of Draft Regulations:

The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 obliges employers to treat fixed-term employees no less favourably than permanent employees. It uses the device of a comparator, as in the Part-Time Workers Regulations. Following the announcement on 8th November 2001, the regulations will also cover pay and pensions. The Regulations contain significant exclusions: apprenticeships, Government training schemes, agency workers and members of the armed services (but they do cover Reservists) are excluded. Regulation 1 defines a fixed-term contract as one which is made for a specific term in advance or terminates on the completion of a particular task (other than reaching bona-fide retiring age). Regulation 3 specifies that a fixed-term employee must be treated no less favourably than a permanent employee as regards the terms of contract or being subjected to detriment, and specifically lists periods of service qualification, the opportunity of receiving training, and the option to secure permanent employment. There is a get out in Regulation 4 of "objective justification" but if the employee believes s/he has been treated less favourably, s/he can ask for a statement from the employer and can complain to an employment tribunal. Regulation 8 prohibits successive fixed-term contracts for more than four years, which is then deemed to be a contract of indefinite duration. A different period can be arranged by a collective or workforce agreement. Regulation 10 restricts the parties from contracting out of this prohibition in any other way. Part IV lists special classes of person: Crown employees, House of Lords and House of Commons staff and the police are all regarded as employed within the terms of these Regulations, but they do not apply to the armed forces. Part V gives important exemptions to these Regulations: they do not apply to apprenticeships, Government training schemes or agency workers.

The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002 amends The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 in the light of the changed conditions for fixed-term employees. As explained on the DTI website, the government decided that the current definition of comparators was too restrictive, and that now part-timers on a fixed-term contract can compare themselves with a full-timer on either a permanent or fixed-term contract. Likewise, although less importantly, part-timers on a permanent contract can compare themselves with full-timers on a permanent or fixed-term contract.