A DHB is among employers accused of abusing fixed term contracts and probationary periods now that big businesses are restricted from hiring workers on 90 day trials.
Last month marked two years since the controversial 90 day trial period was banned for medium to large businesses employing more than 20 staff.
The fire-at-will legislation, that also allowed workers to leave their employment without a formal process within 90 days of starting a job, was brought in by the previous National government in 2010.
But in 2018, the Labour-NZ First government decided to restrict the legislation, only allowing employers of 19 or fewer employees to use it, to cushion the risk of hiring new workers for employers.
While roughly 530,000 small businesses in New Zealand, representing 97 percent of all firms, could still use the 90 day trial, small businesses only account for 28 percent employment.
Auckland-based worker’s advocate Nathan Santesso says bigger businesses have found creative ways to protect themselves from the risk of hiring new workers.
He claims the work-around for bigger employers has been signing up workers to “fake” fixed term contracts. He describes them as being "fake" because fixed term contracts, which allow businesses to employ people for one-off projects or maternity leave cover, are being rolled over once they expire.
“It's the new 90 day trial, but worse,” Santesso says.
He says these illegal fixed term contracts are leaving workers’ in perpetual state of uncertainty.
Santesso says he is currently working on a case that involves a former Counties-Manukau District Health Board administration worker fighting for redundancy pay after the organisation disestablished her permanent position in February and offered a fixed-term contract for administration work instead.
The woman claims the fixed term roles she was offered were essentially the same job she had done previously and did not specify whether she would be needed when the contract ended, or if it was for a certain project.
As she refused to accept the job, she also lost her redundancy payout, despite having worked for the DHB for more than 10 years. Santesso says the woman's taking the District Health Board to the Employment Relations Authority to resolve the matter.
Employment lawyer Calum Cartwright said legally, fixed term contracts must spell out the reasons for the fixed term, the end date and clearly indicate there is no need for the job when the contract expires.
If the reason is not specified in the fixed term employment contract, the worker could be considered a permanent employee by law.
“If you're renewing a fixed term every month, it doesn't sound like a valid fixed term, it sounds like a casual employment agreement,” Cartwright said.
An Employment Court decision in 2019 shed light on what is considered a genuine reason for fixed term employment agreements.
The case of Morgan v Tranzit Coachlines found the bus driver, Paul Morgan, was employed by the company, contracted by the Ministry of Health, for almost 20 years on recurring fixed-term employment agreements without annual leave entitlements.
The Court ruled Morgan was actually and employee of the company and the company's reason for employing him on roll-over fixed-term contracts due to funding concerns from the Ministry of Health were not reasonable grounds as all bus companies faced similar funding pressures.
Cartwright said he has noticed a “spike” in their use in Wellington in the public sector, connected to work around Covid.
Because the law was specific on what counted as a fixed term contract, he said, more workers were raising personal grievances about their fixed term contracts since the 90 day trial became restricted.
What had also helped workers was that under a fixed term contract, workers had all the benefits of an employee – including sick leave, holiday pay entitlements and the right to raise a personal grievance.
The Ministry of Social Development, in charge of administering much of the $13 billion wage subsidy scheme, had by far the most significant increase in new hires last year.
Of the 3000 staff hired last year, the majority, 49 percent, were hired on fixed term contracts.
According to Te Kawa Mataaho (Public Service Commission) data, the number of fixed term employees has been rising since 2019.
From 2016 until 2018, fixed term contract workers made up 7.5 percent of total employees. This grew to 8.3 percent in 2019 and then 8.6 percent last year.
PSA secretary Erin Polaczuk said while there had been an increase in fixed term contracts in recent years, it was difficult to link it to the 90 day trial restriction.
But she said it was likely the Government’s recent pay guidance would lead to more workers taking contract jobs to find other ways to make an income. “Having people on long term contract roles is a sham way to work. You don’t want constant churn in our public sector,” Polaczuk said.
Recruiter Shannon Barlow said there had been an increase in fixed term contracts in the past couple of years and 90 day trial restrictions played into this; the reasons employers were giving were around the future of work.
Businesses said they were hiring people on a fixed term basis due to head count restrictions or project based needs that make it cheaper to have someone on a fixed term contract rather than to pay contractor costs.
Another trend Cartwright said had emerged that linked to the 90 day trial restrictions was an increase in probationary period clauses in contracts.
Workers on probationary periods can still be fired at the end of the period, but they differed from the 90 day trial in technicality as employers must have a fair reason that they had communicated to the employee.
But, probationary periods were not limited to a time period. Cartwright had seen contracts with probationary periods lasting up to six months.
Reasonably, there should be a limit for how far an employer could extend a probationary period and at which point their usual obligations for performance management would kick in, he said.
As probationary period clauses become more popular, Cartwright said he wouldn't be surprised if this was raised in the court seeking clearer terms.
