A New Zealand Teaching Association (union) has claimed that employees are being “forced” to accept fixed term contracts. The Teaching Association reports that only 15% of new teaching graduates are being employed in permanent positions, with many schools relying on fixed term contracts as a way to manage funding from year to year or to “trial” new teachers. While that dispute is between the employers in the education sector and the union, it may be useful to reinforce how fixed term contracts may be used in the New Zealand context.
In New Zealand, fixed term employment contracts can only be used where an employer has a genuine reason based on reasonable grounds for limiting employment to a fixed term. Genuine reasons could include (but are not limited to) project work, parental leave cover or seasonal work. Examples of employment cases where the reasons were not held to be based on reasonable grounds include uncertainty around funding, concerns about an uncertain economic climate or to assess whether an employee is suitable for a position.
The consequences of not complying with the requirements for a fixed term contract are that if an employee challenges his/her termination, the employer is not able to rely on the fixed term to justify that employee’s termination. The practical effect of this will be that the employee relationship is permanent, and the employer could be ordered to pay compensation for an unjustified dismissal or to reinstate the employee.
Note: The legislative test for whether an employer’s actions were fair and reasonable is based on an assessment of what a fair and reasonable employer could have done in all the circumstances: section 103A Employment Relations Act 2000.