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Important Changes Coming to Fixed-Term Employment Contracts

4 January 2016

Mallet of justice!On 26 June 2015, an amendment to the Labour Code was passed by the Parliament, significantly changing the regulations so far in force as regards concluding fixed-term employment contracts.

The previous situation can be summarised as follows: fixed-term employment contracts resulting from the employment relationship parties' shared intention – in practice one can see periods ranging from 3 to 5 years or more. Fixed-term employment contracts could be terminated relatively quickly, with a two weeks' notice (as long as such time was allowed for when the contract was being concluded). The previously binding regulations obliged the employer to apply a limit to the number of consecutive fixed-term employment contracts concluded – only the third one had to be a permanent one.

The amendment to the Labour Code being currently in the works will significantly change the rules of fixed-terms contracts, making them quite similar to permanent employment contracts. This is the goal set by the originators of the reform, which by principle is to lead to a decrease in the popularity of fixed-term contracts and a rise in permanent employment.

The most significant change consists in limiting the overall length of fixed-term employment with a single employer to 33 months (the first contract being optionally preceded by a trial period contract). The employer will not be able to conclude with an employee more than three fixed-term contracts – the fourth one will have to be a permanent one. Only in the event the employer indicates objective reasons on its part (the legislative body does not, however, specify permissible cases, leaving them to practice), the length of employment and the number of contracts will not be limited. There is, none the less, a considerable curbing applied here – the employer willing to employ someone for a length exceeding the permissible period will have to specify the reasons for this in the contract, as well as it will be obliged to report the fact of employing a worker for a period exceeding 33 months to the National Labour Inspectorate. Therefore, an employer hiring staff for periods exceeding the limits is highly likely to undergo the Inspectorate's audit. Failure to include relevant information in an employee's contract as well as failure to provide information to the labour inspector will be deemed to be an offence, for which the inspector may impose a fine of 1,000 to 30,000 PLN.

Another vital change is the introduction of uniform notice times for fixed-term and permanent employment contracts. After the amendment comes into force, these will be 2 weeks, a month and 3 months respectively (depending on the length of tenure with a given employer). The previous fixed-term employment contracts with a two weeks' notice clause will have to be terminated a longer time in advance when the act becomes binding – however, the period before the changes' implementation will not be allowed for when calculating the length of tenure with the employer.

The contract for the duration of specific work will be eliminated from the Labour Code, being currently a marginal form of employment (it was unpopular due to the lack of possibility of its termination before the work being its purpose is done).

The legislative body also introduces to the Labour Code the institution of releasing an employee from delivery of work with the employee retaining the entitlement to remuneration over the notice time. Previously this solution was permissible solely in practice, with no anchorage in the regulations of the Labour Code.

From employers' point of view, also the transitory regulations of the act amending the Labour Code are of importance.

The consequence of the new regulations for fixed-term contracts entering into force will in some cases be their conversion into permanent contracts. It will be so, if – after the new regulations come into force – the employer employs a worker on the basis of the previous fixed-term contract for a period exceeding 33 months or if they breach the rule of three fixed-term contracts by employing a worker for the fourth time.

Employers will be burdened with the responsibility of indicating in fixed-term contracts valid on the day the act enters into force and concluded for a period longer than the said 33 months objective reasons for which the duration of such long contracts exceeds the limit permitted. Furthermore, employers will be obliged to inform Labour Inspectors of long term employment contracts concluded. Failing to perform this obligation will be deemed to be an offence. Owing to a lack of official interpretations, only by practice will we know whether inspectors are strict about the regulations mentioned above.

The new regulations will no doubt bring about a lot of uncertainty, particularly among employers who fail to read them thoroughly. It is only practice that can show us whether the goal set by the legislative body, consisting in increasing the popularity of permanent contracts and decreasing the scale of fixed-term employment, will be attained.

The works on the act having been completed at the lower chamber of the Parliament, the amendment was passed to the Senate.

More information: Invest in Wrocław_Labour Law Changes_ENG