2016-Aug 26: Acceptable reasons for fixed term employment agreements

Visa Pak 274 - Updated information for staff about reasons why an employer offered with a fixed term employment agreement.

Visa Paks

26 August 2016

Following previous advice to staff, this item provides further information on fixed term employment agreements.

The underlying objective of section 66 of the Employment Relations Act 2000 (the ERA) is to promote a preference for permanent employment over limited term employment wherever possible. Where an employer genuinely believes, based on assessable data or information, that the continuation of a position will be affected by circumstances relating to the operation of the employer’s business, then a fixed term employment agreement may be an option.

Fixed term employment agreements are often used for purposes such as seasonal work, the completion of a specific task, or the filling of a position on a temporary basis such as maternity leave cover. There must be genuine reasons based on reasonable grounds for an employer to offer a fixed term employment agreement. Genuine reasons for limiting the term of employment must be related to the position of employment, and not to the prospective employee in that position. The expiry of a work visa is a circumstance of the position holder, not of the position itself. If a position is a permanent one, it should be filled on that basis even if an employee only wishes to work for a finite term. In this situation, an employee would simply provide notice to resign from the position in line with the terms and conditions of their employment agreement.

The Employment Court has stated that “[fixed term employment should be confined to special discrete projects of limited duration as opposed to situations of ongoing employment.” Canterbury Westland free kindergarten Association (T/A Kidsfirst Kindergartens) v NZEI [2004] 1 ERNZ 547 at [54].

An example of an acceptable reason to offer a fixed term contract is that its duration is based on specific project timeframes. For example:

  • The employer has entered into an agreement with its client to supply personnel for a period of 12 months.
  • The employer currently has construction based projects available for a period of 12 months.
  • The season runs from April to October and employment is offered in line with this.
  • Employment is for a fixed period to cover maternity leave.

It is not acceptable to offer a fixed term contract simply because the industry is unpredictable and the workflow is unknown, or to offer a fixed term agreement in line with registration requirements. For example:

  • The uncertainty surrounding the employer’s customer demand given fluctuation within the industry.
  • Employment is offered in line with an employee’s annual practising certificate.

If a person holding a work visa is employed in a permanent position but has their visa revoked or is unable to obtain a new one, then the employer will commit an offence under the Immigration Act 2009 if employment is continued. Similarly, if an employee loses any practising certificate required by law, employment is also unable to be continued. Loss of either enables the employer to end the employment without resorting to the operation of a fixed term agreement. The position will still be in existence for someone else to be appointed to. Provisions can be included in an employment agreement to the effect that employment is conditional upon the employee holding and retaining the appropriate visa under the Immigration Act.