Are your casual employees truly casual? Or is the nature of their employment something more permanent? The Employment Court has recently dealt with this issue, noting that the nature of an employment relationship may change over time. In this FYI, we explain the key differences between casual, fixed term, and permanent employment relationships and set out factors considered relevant by the courts.

Casual vs fixed term employment

The Employment Court's recent decision in Muldoon v Nelson Marlborough District Health Board [2011] NZEmpC 103 considered the differences between casual and fixed term employment. This case concerned the unjustified dismissal of Mr Muldoon, a casual employee who had become a fixed term employee and was found by the Court to be "permanent" at the time of his dismissal.

Mr Muldoon was first employed as a casual worker and then accepted "casual employment on a full time basis for a finite period" to cover for an employee. The expiry date of the fixed term passed and Mr Muldoon continued to work in the same capacity for a further 6 months before his employment ended. When Mr Muldoon raised a personal grievance for unjustified dismissal, the Board argued that Mr Muldoon had remained a casual employee.

The Employment Court, in overturning the decision of the Employment Relations Authority, held that Mr Muldoon's employment was no longer of a casual nature when he became a fixed term employee. The Board failed to engage Mr Muldoon for a further fixed term after his original fixed term expired. This non-compliance with section 66 of the Employment Relations Act 2000 meant that Mr Muldoon was no longer a fixed term or a casual employee but had become "permanent". Termination of his employment was therefore unjustified and the Court awarded 18 months' lost wages and $4000 for lost expectation of ongoing work to Mr Muldoon.

In its consideration of what type of employment relationship Mr Muldoon held with his employer, the Court discussed the general differences between fixed term and casual employment:

Fixed term employment:

  • Is characterised by set hours and days of work (for a predetermined period of time);
  • Must be related to a specified project or event (eg. cover for an employee on parental leave or long term sickness);
  • Comes to an end for a specific reason which must be provided to the employee. Generally there is no ongoing relationship after the fixed term expires;
  • Creates an expectation of work during the whole fixed term period; and
  • Creates predictability and reliability for employer and employee.

Casual employment:

  • Is characterised by irregularity of engagements and the shortness of their durations (ie potentially as short as one shift);
  • Does not require the employer to justify why the employee is needed; and
  • Means that there is no expectation of work for either party beyond each engagement.  

Casual vs permanent employment

The recent Employment Court decision of Rush Security Services Ltd t/a Darien Rush Security v Samoa [2011] NZEmpC 76 dealt with an employee who was originally employed on a casual basis as a security officer. The Employment Relations Authority found that Mr Samoa was a permanent employee when his employment was terminated and that he had therefore been unjustifiably dismissed.

On appeal, the Employment Court, following the reasoning of its previous decision in Jinkinson v Oceana Gold (NZ) Ltd [2009] ERNZ 225, found that Mr Samoa's employment had mutated from casual to permanent employment. Although Mr Samoa had started out as a casual employee, he had worked an average of 50 hours per week for 7 months, including most weekends on 12 hour shifts. In addition, Mr Samoa was supposed to be paid an hourly rate that included an 8% allowance for holiday pay, but was only ever paid his hourly rate. This was held to be more consistent with permanent employment than casual employment.

Mr Samoa was awarded three months' lost wages and $5000 in compensation for loss of dignity.

Indicators of permanent employment

The nature of an employment relationship may change over time. This requires the Authority or Court to assess the nature of the relationship at the time that suits the proceedings. For example, where there is a claim for unjustified dismissal, the Authority or Court will look at the relationship at the time that the employment was terminated. The Court has found that the following factors indicate employment of a permanent nature:

  • A predictable and consistent pattern of work;
  • An employment agreement that contains mutual employment related obligations: For example, an obligation on the employer to provide work and the employee's corresponding legitimate expectation of payment. A casual employee has no guarantee of hours of work and is not bound to accept offered work;
  • Use of rosters: Under the Employment Relations Act 2000, a worker is an employee from the time each offer of a period of work is made and accepted until that work is completed. This may be particularly important where a roster has been used to offer work, well in advance of the time at which the work is to be done. Through routine inclusion in a roster, an employee may become an integral part of the workforce;
  • Exclusion of 8% holiday pay from wages;
  • A requirement that an employee must seek approval before taking leave;
  • Restraint of trade/non-solicitation clauses;
  • Overtime, call out or stand by clauses; and
  • Bonus, annual review, promotion, or relocation cost clauses.  

Recommendations

Where an employment relationship is labelled differently in the employment agreement to the actual nature of the employment relationship, the Court has held that substance will prevail over form. The effect of parties' conduct may amount to rescinding the terms of the original employment agreement.

Employers should take care when engaging casual employees for extended periods of time. The provisions of the employment agreement and the employee's working patterns (whether casual, fixed term or permanent) should be periodically reviewed to ensure that the label given to the employment relationship is accurate and appropriate.