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employment

Fixed-term vs. Permanent employment: Legal rules

Key Takeaway

New Zealand employment law distinguishes between permanent and fixed-term employment. Fixed-term agreements require a genuine reason, specified in writing, for the employment to end on a particular date or task completion. If these conditions are not met, the employment may be considered permanent. Both types of employees generally have the same core employment rights and protections.

Fixed-Term vs. Permanent Employment in New Zealand

New Zealand employment law recognises different types of employment relationships, primarily distinguishing between permanent and fixed-term employment. Understanding the legal rules, rights, and obligations associated with each is crucial for both employers and employees.

Permanent Employment

Permanent employment, also known as indefinite or ongoing employment, is characterised by an absence of a predetermined end date. This type of employment is presumed to continue indefinitely, subject to lawful termination processes. Employees in permanent roles typically have a reasonable expectation of ongoing work, provided their role continues and performance is satisfactory.

Rights and obligations in permanent employment include, but are not limited to, the right to minimum wage [Source: Minimum Wage Act 1983, s 4], paid leave entitlements [Source: Holidays Act 2003, Part 2], and the ability to raise a personal grievance for unjustified dismissal or disadvantage [Source: Employment Relations Act 2000, s 103]. Termination of permanent employment generally requires a valid reason and adherence to a fair process, including notice periods as specified in the employment agreement or the Employment Relations Act 2000.

Fixed-Term Employment

Fixed-term employment is an employment relationship that is established for a specific period or for the completion of a particular task or project [Source: Employment Relations Act 2000, s 66(1)]. Unlike permanent employment, it has a predetermined end date or event.

Requirements for a Valid Fixed-Term Agreement

For an employment agreement to be genuinely fixed-term, specific legal requirements must be met:

  1. Genuine Reason: There must be a genuine reason, based on reasonable grounds, for the employment to end in a particular way (e.g., on a specific date or at the completion of a specific task) [Source: Employment Relations Act 2000, s 66(1)(a)]. The reason for the fixed term cannot be to exclude the employee's rights under the Employment Relations Act 2000.
  2. Written Agreement: The employment agreement must explicitly state the way in which the employment will end and the genuine reason for it [Source: Employment Relations Act 2000, s 66(1)(b)]. This must be communicated to the employee prior to the commencement of employment.

Examples of genuine reasons might include covering for parental leave, undertaking a specific project of finite duration, or for seasonal work. These examples are illustrative and subject to the specific circumstances and interpretation of the 'genuine reason' requirement under the Act.

Consequences of Invalid Fixed-Term Agreements

If the requirements for a genuine fixed-term agreement are not met, particularly the genuine reason or written agreement stipulations, the employment is regarded as not being for a fixed term [Source: Employment Relations Act 2000, s 66(2)]. In such cases, the employment may be treated as permanent from its commencement, granting the employee the same rights and protections as a permanent employee, including the right to challenge termination as an unjustified dismissal.

Rights and Obligations of Fixed-Term Employees

Fixed-term employees generally possess the same core employment rights and obligations as permanent employees. These include:

  • The right to a written employment agreement [Source: Employment Relations Act 2000, s 59].
  • The right to minimum wage [Source: Minimum Wage Act 1983, s 4].
  • Entitlement to paid leave, such as annual leave, sick leave, and bereavement leave [Source: Holidays Act 2003, Part 2].
  • The protection of good faith obligations between employer and employee [Source: Employment Relations Act 2000, s 4].
  • The right to raise a personal grievance for reasons other than unjustified dismissal, such as unjustified disadvantage, discrimination, or harassment [Source: Employment Relations Act 2000, s 103].

Ending Fixed-Term Employment

If a fixed-term agreement is valid and meets the requirements of section 66 of the Employment Relations Act 2000, the employment automatically ends on the specified date or upon completion of the task without the need for a formal termination process or notice period [Source: Employment Relations Act 2000, s 66(1)].

Personal Grievances for Fixed-Term Employees

A fixed-term employee may not bring a personal grievance for unjustified dismissal if their employment ends in the way specified in a valid fixed-term agreement, and the requirements of section 66 of the Employment Relations Act 2000 were met [Source: Employment Relations Act 2000, s 103A(3)]. However, fixed-term employees retain the right to bring a personal grievance on other grounds, such as unjustified disadvantage, discrimination, sexual harassment, or racial harassment [Source: Employment Relations Act 2000, s 103].

General Employment Law Principles (Applicable to both)

Irrespective of whether employment is fixed-term or permanent, all employment relationships in New Zealand are underpinned by fundamental principles:

  • Good Faith: Employers and employees must deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This includes being responsive and communicative, not misleading or deceiving, and providing access to relevant information.
  • Written Employment Agreements: All employees must have a written employment agreement [Source: Employment Relations Act 2000, s 59]. This agreement must include certain mandatory clauses, such as a plain language explanation of the services available for resolving employment relationship problems.

When to Seek Independent Legal Advice

Individuals seeking specific guidance on their employment situation, interpretation of their employment agreement, or options for resolving an employment relationship problem are encouraged to consult with an employment law specialist. Advice can also be obtained from official government bodies such as Employment New Zealand, or from Community Law Centres for free legal assistance, especially if they are unsure about the validity of a fixed-term agreement or their rights upon termination. Seeking independent advice ensures that individuals understand their specific rights and obligations under New Zealand law.

Key Resources