Can an employer terminate a fixed-term contract early?

An employer can terminate a fixed-term contract early if the contract contains a notice clause. For example, it could contain a right for the employer to terminate the employee's employment at any time during the fixed term on giving one week's or one month's notice.

The employer would need to exercise such a notice provision if it wishes to terminate the contract of an employee taken on as maternity cover, for example, if the employee on maternity leave decides to return early.

Where the fixed-term contract contains no early termination provision, terminating the contract before the end of the term would amount to a breach of contract. The employee will be able to seek damages equivalent to the unexpired portion of the fixed term. This could amount to a substantial claim if the fixed term still had a number of months to run before its expiry.

Including a notice provision does not stop a contract being a fixed-term contract for the purposes of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.