9.05.2018

What type of employment relationship do you have? Are you using the right employment agreement?

Which type of employment agreement should you be using?

Different types of employment require different employment agreements.  Unfortunately, the types are sometimes misunderstood and the wrong type of employment agreement used – this can lead to all sorts of trouble down the track! This article gives you a quick overview to set the record straight.

Permanent Employment

Most employees are permanent employees; that is, the employee’s employment is for an unlimited and indefinite duration. Employment will continue until the employee resigns or the employment relationship is terminated in accordance with the employment agreement.

Permanent employment can be for any number of hours and therefore can be on a full time or part time basis. There is no legal definition of full time and part time employment, but 30 – 40 hours per week is usually considered full time employment.

Note that new employees who are subject to a trial period are still considered to be permanent employees – i.e. the trial period does not make them fixed term employees.

Fixed Term Employment

Section 66 of the Employment Relations Act 2000 expressly allows an employer and employee to agree to employment ending:

  • At the close of a specified date or period;
  • On the occurrence of a specified event; or
  • At the conclusion of a specified project.

However, before an employee and employer agree that the employee’s employment will end in one of the above ways, the employer must have genuine reasons based on reasonable grounds for the fixed term agreement, at the time it was entered into. A common reason is to cover the absence of a permanent employee for an extended period of time (such as parental leave).  A genuine reason is not to assess an employee’s suitability for an ongoing role or because the employee’s work visa will expire.

The employer must advise the employee of when or how employment will end, and the reason it will end that way.  The way in which employment will end, and reasons for employment ending in that way, must also be recorded in the employment agreement.  If the fixed term ends on a date, the end date needs to be identifiable and linked to the reason for the fixed term – that is, there needs to be a genuine reason why the fixed term employment ends on that particular date and not some other date.  In reality, the reasons for a fixed term are often more likely to end because of an event or project rather than on a particular date.

The consequences of not having a genuine reason for a fixed term agreement, or a fixed term clause in the employment agreement that is not compliant, is that an employee may elect to treat the fixed term as being of no effect.  The agreement would then become a permanent employment agreement (for an indefinite duration) but the validity of the agreement is not otherwise affected.

Casual Employment

Casual employment is a subset of fixed term employment. The difference is that a casual employee is employed on an ‘as and when required’ basis, for one or more (usually short) fixed term engagements.  At the end of each of those mini engagements the employer has no obligation to offer any future employment and the employee has no obligation to work.

A casual employee may be offered employment from time to time by the employer to do a period of work or a specific task or for specific hours.  A casual employee can accept or reject the offer of employment.  If an employee accepts an offer, each time the employee works it will be a separate engagement and a separate fixed period of employment.

With a casual employee there is no expectation of ongoing employment or re-employment. If an employee is part of a roster or, for example, works every Monday, the employee is not a casual employee and will instead be a permanent employee employed to work on a part time basis.

Some businesses do legitimately have casual employees. They usually form part of a group or ‘pool’ of employees upon whom the employer can call, on an as and when required basis, to help out when things get busy or to fill in for a sick employee.  Casual employees can also be used to cover the absence of permanent staff from time to time, or when an employer has extra work that cannot be performed by its permanent staff. However, rostered employees will not be casual and the more frequently an employee works, the more likely that the work is permanent, even if it occurs on different days.

As a final point, all employees are required to have a written employment agreement regardless of which type of employment relationship it is. Permanent, fixed term and casual employment agreements are all different, and cannot be used interchangeably.

If you have any questions about your employees, which type of employment agreement you should be using, or any other aspect of employment law, please give us a call.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
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