Fixed Term Employment Agreements
Section 66 of the Employment Relations Act 2000 (“ERA”) allows an employer to employ an employee for a fixed term. There are, however, various prerequisites, set out briefly below.
An employee and an employer may agree that the employment of the employee will end either:
- at the close of a specified date or period; or
- on the occurrence of a specified event; or
- at the conclusion of a specified project.
In addition, the employer must have genuine reasons based on reasonable grounds for specifying that the employment of the employee is to end in one of the above ways, and advise (it must be in writing in the employment agreement) the employee of when or how his or her employment will end and the reasons why.
Note that employers cannot use fixed term employment agreements to exclude or limit the rights of employees under the ERA or the Holidays Act 2003, nor to establish employees’ suitability for permanent employment.
The Facts as set out by the Authority
Carter Holt Harvey (“CHH”) had been considering restructuring its business and in March 2002 proposed a site wide restructuring proposal. Amongst the proposed changes was a plan to have production workers act as firefighters, with a reduction in the number of full time firefighters.
Mr McAuley was a professional firefighter. He entered into a fixed term agreement with CHH on 29 November 2002.
On 24 February 2003, CHH wrote to the Union advising that CHH was investigating contracting out the emergency services as part of the company’s continuing attempts to restructure emergency services.
Mr McAuley entered into a second fixed term agreement on 7 March 2003 to expire on 31 May 2003.
In May 2003 a new collective agreement was settled. CHH’s proposal to use production workers in fire fighting roles was an issue during collective bargaining, and an important aspect of the settlement was that CHH withdrew this proposal. Consequently there were no proposed redundancies of firefighters flowing from the redeployment of production staff.
On 18 June 2003, Mr McAuley was offered a third fixed term agreement, which provided that the agreement and Mr McAuley’s “temporary role” would cease on completion of the restructure, and that “implementation of the proposed changes will occur following 31 August 2003.”
Following 31 August 2003, Mr McAuley then entered into a fourth fixed term agreement, which differed from the previous ones in that there was no reference to a date, only to an event: “…fixed term Agreement commencing on 5 September 2003 and terminating on the event of the completion of the restructure.”
It was only in January 2005 that CHH advised the Union that there was a proposal for restructuring that could be put to the employees. Attempts were made to negotiate changes but these were unsuccessful. In February 2007 a letter was sent to staff regarding the commencement of consultation and on 14 December 2007, notices of termination were provided to staff.
The Authority held that at the time the third agreement was entered into, CHH did not have a “sufficiently specific proposed event” to meet the requirements in section 66 of the ERA. Although CHH wished to review and implement changes to its emergency services, a “genuine but general desire to effect change is not sufficient to bring the provisions of s 66 into effect. That is why there are references to specificity in s 66(1)”.
Accordingly, the third and fourth fixed term agreements were not valid, and upon settlement of the collective agreement in May 2003, Mr McAuley was a permanent employee.
CHH appealed to the Employment Court, which overturned the Authority’s Determination.
The Court did not accept the Authority’s interpretation of section 66, requiring CHH to meet a test of sufficient specificity, and considered that this interpretation lacked analysis and precedent.
Chief Judge Colgan considered whether the employer and employee had agreed that the employment would end on the occurrence of a “specified event” or at the conclusion of a “specified project” as required by section 66. He considered the following definitions from the Oxford Dictionary 2005 could assist:
- Specified: “named or mentioned expressly”
- Event: “a thing that happens or takes place” and “a result or outcome”
- Project: “a plan, a scheme, [or] a planned undertaking”
The Court also reviewed Parliamentary intention, as well as the background to the dispute. It held that from 2001, CHH had intended consistently to change its fire fighting and other emergency arrangements. Although at times different means were favoured by CHH (for example having a combination of fewer professional firefighters with production workers to assist, or combining emergency response and security functions within one team of multi-function employees), the consistent theme was fire service cost saving by restructuring.
Ultimately, it was found that both the tests of “a specified event” and “a specified project” were satisfied in the present case (as were all the other requirements of section 66) and the third and fourth agreements were valid fixed term agreements.
In our view
The Judgment should be viewed with a modicum of caution. For example, if one uses an alternative dictionary, here the Collins Concise English Dictionary 2008, “specify” is defined as “to refer to or state specifically”, and “specific” as “explicit, particular, or definite”, bringing the focus again back to whether some degree of specificity is required.
However, the judgment is binding on the Authority.
Ultimately the approach favoured by Chief Judge Colgan was that the concepts of genuineness and reasonableness inform the need for “a specified event” or “a specified project”. CHH was able to satisfy the Court that, although there were many years before changes were made, the fire service elements of its site wide restructuring plans remained constant. Despite changes to the methods/ways of restructuring following negotiations with the Union, its overall intention never changed.
Nonetheless the number of years appears to be a very long time for a position to be described as temporary, which a fixed term position is.