An increasing number of countries are imposing restrictions on fixed-term contracts in favor of indefinite employment. Nonstandard employment such as fixed-term is often viewed as “precarious work” equating to insecure, uncertain and unpredictable working conditions.

However, often it’s the rigidity of a country’s employment laws that dissuade businesses from wishing to employ workers on a traditional, “indefinite” basis. For example, European labor markets are generally considered to be too rigid. Making labor market rules more flexible while at the same time providing a good level of social protection is one of the main challenges of the EU’s long-term vision for economic, social and environmental reform (the so-called “EU 2020” goal).

Pushing Indefinite Employment

Several European jurisdictions have made moves to encourage indefinite employment. For example:

Italy. As of Nov. 1, all fixed-term employment contracts in Italy, as well as all extensions and renewals, issued to both employees and agency temporary workers will be subject to new restrictions.

The Decree Law No. 87 of July 12, the so-called “Dignity Decree,” reflects a change in government policy under the new populist government elected in June 2018. It rolls back reforms introduced under the former government in 2015 under the Jobs Act.

The law reduces the maximum length of fixed-term contracts of employment to 24 months, rather than the previous 36 months. Any contract longer than 12 months will need to be justified by setting forth in the contract the reasons that support this choice in lieu of indefinite employment. The law also sets out a new cap, providing that temporary agency workers, together with fixed-term employees, cannot represent more than 30% (previously 20%) of a company’s total workforce as of Jan. 1 of the year in which they are hired, unless collective bargaining agreements permit otherwise.

France and Germany. In France, indefinite-term employment contracts are the norm, and fixed-term contracts the exception. If a fixed-term contract continues after its term or is renewed more than twice for an overall duration of more than 18 months, French courts may deem such a contract as one with an indefinite term.

And last year, on April 1, 2017, Germany joined France in limiting the deployment of temporary workers to the same hirer to a maximum duration of 18 consecutive months. The legal consequence of a breach of the German law is that the employment relationship is declared void and the worker is deemed to be a permanent employee of the hirer. The coalition government also plans to limit fixed-term employment contracts to 18 months.

A Worldwide Trend

Limiting fixed-term contracts in Europe also reflects legal trends worldwide.

Japan. As of April 1, Japan’s restrictions on fixed-term employment contracts, established in the amended Labor Contract Act took effect. Employees with at least five years’ service with a single employer from April 1, 2013, who wish to convert, can now demand to be considered indefinite-term employees upon the expiration of their fixed-term contracts. The law also applies to dispatched workers who are employed on a fixed-term basis by a staffing agency.

China. The Labor Contract Law in China, for example, allows an employee to require his or her employer to enter into an indefinite-term contract if they have had two employment contracts with the same employer or have serviced the same employer for 10 years.

South Korea. The supreme court in South Korea ruled in 2016 that a fixed-term employee has a reasonable expectation of conversion to an indefinite term based on certain factors such as the employer’s history of offering permanent jobs to other fixed-term employees performing similar duties.

Russia. A fixed-term contract is limited to five years and permitted only for statutorily specified reasons, which are extremely restrictive. Fixed-term contracts failing to meet the stringent statutory requirements are deemed indefinite-term contracts by Russian courts.

Making Work Attractive

Nonstandard employment often appears to be a one-sided arrangement with all the benefits felt by the employer and none by the worker. The challenge for legislators and businesses alike is to make traditional and nonstandard employment attractive to both employers and workers, without the need for rigid term limits and unwelcome sanctions.