European Court of Justice closes permanent contract loophole

Several European Union nations have laws allowing or have legislation pending to allow employers to use a series of short-term, fixed contracts to avoid issuing long-term, permanent contracts. Long-term contracts are used to obtain residency and "premium" visas that generally have more benefits.

However, the European Court of Justice ruled on national legislation in Greece this month that the practice of using the "renewal" of such fixed-contracts is against the law. The ruling is expected to apply to all EU nations, thereby preventing new legislation allowing the practice locally and nullifying any such existing laws.

This is considered a major victory for immigrant labour throughout the EU. It applies directly to the free migration of workers within the EU, but also applies directly for workers coming into EU Member States from countries outside the European Union.

The practice is outlawed, excepting special circumstances where a specific set of detailed, 'objective reasons' for doing so is required.

In Greece, the specific case under consideration allowed employers to issue a fixed, short-term contract, then the employee would be out of work for 20 days. A new fixed-contract would then be issued, thereby allowing the employer to avoid committing to permanent contracts. Workers would thus be denied many residency and visa options, along with other benefits.

The European court ruled that local courts must interpret national law as far as possible "in the light of the wording or purpose of the directive concerned with a view to achieving the results sought by the directive." Issued in 1999, the directive aims "to establish a framework to prevent abuse arising from the use of successive fixed-term employment contracts or relationships." It stipulates that EU Member States may determine by local legislation the conditions under which fixed-term employment contracts or relationships are to be defined as "successive."

Meaning, in this case, that no matter the short-term nature of contract work, when workers themselves are engaged in work for long periods of time, they have rights to the benefits of long-term, permanent contracts and residency.

Spain has recently passed national legislation along exactly these lines. In summary, workers who are employed for the same company for 24 months out of a 30 month period using two or more fixed-term contracts have rights to be treated as if they have permanent contracts.

Renewal of a fixed-term contract now applies to one of three reasons: replacing someone who is absent, fulfilling a specifically defined project, or to complete seasonal work.