07.07.21

The Bitter Medicine of Short-Term Contracts

Gavin Goffe
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The Bitter Medicine of Short-Term Contracts

When properly administered, short-term employment contracts can be useful for both employers and workers. Unfortunately, they are prone to misuse and, as we saw with some doctors last week, could even make you sick.

Fixed-term employment contracts are often mischaracterized as contracts for services, and the fixed-term contract employee is sometimes thought to not be a member of staff. This is not necessarily so. The relationship of employer and employee is a contractual one, whether that contract is in writing or not. A ‘contract worker’ may be entitled to the same benefits as a ‘permanent’ member of staff, including overtime, paid vacation leave and maternity leave. It all depends on the duration of the contract, which is the main ingredient that would make some bitter, and whether there is any break between contracts.

The 2-week contract-break is what upsets employees the most. A worker’s tenure is not broken by the expiration of a fixed-term contract if it is renewed immediately. An employee with 12 successive one-year contracts is, therefore, entitled to the same redundancy pay, minimum vacation leave and notice as any other employee with 12 years of continuous service. If, however, there is a break of 2 calendar weeks or more in between those contracts, then the employee’s tenure will be interrupted, and each contract will stand on its own.

Common side effects of 6-month contracts, when used with a contract-break, can include no vacation leave, no maternity leave, no sick leave, no redundancy pay, no pension, no gratuity, no health insurance, always being on probation or extended probation, and not being approved for loans except high-interest payday loans.

Despite the unpopularity of the contract-break, no court or tribunal in Jamaica has ruled that an employee has a legitimate expectation of the renewal of their contract. Similarly, there has been no judgment or award that after a specific number of successive fixed-term contracts, the employee has somehow been converted to a permanent member of staff. Based on how our laws were written, one should not expect to see a decision along those lines.

A 1-year contract of employment can be the foundation for a healthy employer/ employee relationship where expectations are properly managed. For example, an employee working at a not-for-profit organization reliant on subventions or annual grants might not receive a contract for a period longer than there is committed funding. Industries that are project-based, like construction, will also prefer to match their employment contracts to the expected duration of the project. We have also seen Business Process Outsourcing companies (commonly known as call centres) use fixed-term contracts to assign workers to specific clients or campaigns with discrete terms and conditions, including compensation and timing of shifts.

The uncertainty brought on by the coronavirus pandemic has also caused increased reliance on short, fixed-term contracts. Businesses with short contracts are generally more agile and able to respond to a sudden loss of revenue more effectively. Many of these contracts have an hourly rate combined with a clause allowing the employer to unilaterally decrease or increase the number of hours worked for any given period. This facilitated immediate reactions to shifting curfews and instant lockdowns. Those businesses did not need to obtain their staff’s consent to a salary reduction, preferring instead to reduce the number of work hours or workdays to better manage their revised budgets.

Short contracts also allow for easier introduction of new corporate policies, including mandatory vaccination, where appropriate. A medical doctor who refuses to take a COVID-19 vaccine, for example, might notice that the new 6-month contract being offered now includes vaccination as a condition of employment. If such a condition is not already included in the contracts of healthcare workers, it ought to be.

Fixed-term contracts for a longer duration, such as 2-5 years, can be very attractive to both employers and employees. A contract for 2 years or more can legally include a clause that waives any entitlement to redundancy pay upon its expiration. Contracts with 5-year terms have been used in the lead-up to general elections to protect employees from being victimized by a new administration. The gratuity in lieu of pension paid under these contracts can also be used by the employee for any purpose whereas currently, the ‘permanent’ employee can only access their pension contributions if they retire, resign or are dismissed.

Speak with a professional to see if fixed-term contracts are right for you.

Gavin Goffe is a partner at Myers, Fletcher and Gordon, and is the head of the firm's Litigation Department. He may be contacted at gavin.goffe@mfg.com.jm or through the firm's website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.