Gone are the days when new employees were hired to start work immediately. If there wasn’t much work, you hired them, and they stayed until the work ran out.
Now such arrangements have to be planned and recorded in advance, so they comply with the Employment Relations Act 2000. This can be complicated.
Take Deirdre, owner of a perfume and luxury gifts shop. She has a detailed business plan to May 2008 including two new employees, whom we’ll call Andy and Sue.
Andy is to work November and December only; Sue has started and is on trial for three months. Deirdre thinks the safest way to check Sue’s suitability is to employ her for a fixed term.
If she isn’t any good, her employment will end after three months.
Deirdre hasn’t given them written employment agreements because they are on short contracts and their employment will soon be over.
Deirdre’s plan makes sense for her business. But she must comply with the Employment Relations Act, regardless of the length of employment. Then it will make sense for Andy and Sue also.
For fixed term employment of any length, Deirdre must have a genuine reason based on reasonable grounds for the fixed term before Andy accepts the job. She must tell Andy what that reason is and when the employment will end.
Perhaps an employee is needed for one project, and then there will be no more work. Perhaps in a business there is a seasonal increase in work. Both are valid operational reasons.
But checking Sue’s suitability for permanent employment is not. And using a fixed term to exclude or limit an employee’s rights under the Holidays Act is also not acceptable.
The employment can end at a specified date; when a specified event happens; or at the conclusion of a specified project.
The way the employment will end and the reason for the fixed term must be written into the employee’s employment agreement.
Before starting work, the employee must be given the intended employment agreement containing all the terms required by the Employment Relations Act 2000; advised of the right to seek independent advice; given a reasonable opportunity to do so; and the employer must consider and respond to any questions about the employment agreement.
Employer and employee must agree on the terms of employment before the employee starts.
Deirdre said she wasn’t convinced that compliance really mattered.
I looked at her business plan and asked if it provided for Andy and Sue’s wages through to next May and then the cost of a personal grievance claim by Sue. She said of course it didn’t. Yet if Deirdre doesn’t contract with Andy and Sue in the correct way, that’s what she may face.
Andy could elect to treat the fixed term as ineffective, meaning his employment must then continue till he resigns or Deirdre has good cause to terminate it.
Because Deirdre had no right to employ Sue for a fixed term, Sue also could remain employed or, if let go at the end of the fixed term, claim she was unjustifiably dismissed and raise a grievance.
Deirdre took back her business plan, and added a new section.
“There,” she said, “fixed it.” She gave the plan to me. There was a new heading – “Legal fees for employment claims”. I think Deirdre and I have a way to go!
By Penelope Ryder-Lewis, first published in the Dominion Post