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Court Clarifies Conditions of Fixed Term Employment

Court Clarifies Conditions of Fixed Term Employment

The court case

The Employment Court has handed down a judgment recently that provides some clarity to fixed term employment provisions.

The case the Court ruling involved a school bus driver, employed for over 18 years on a series of fixed term agreements. Every year, the Ministry of Education gave the driver’s employer funding for school bus services.

The company argued it was reasonable that they continued employing the bus driver on fixed term agreements, as the yearly funding came with a degree of financial uncertainty.

The Court held that  financial uncertainty is something that all business face to some degree, therefore this alone was not sufficient to justify fixed term employment.  The Court therefore held that the driver was a permanent employee, as the fixed term arrangements didn’t meet the legal requirements.

Having a pattern of successive fixed term contracts, like the bus driver above, doesn’t necessarily mean the employment is considered permanent. However, the more it rolls over the more likely it is to attract scrutiny that it is not a genuine fixed term.

The Court agreed with the employee and found that financial uncertainty was an ordinary business risk, and not a genuine reason to enter into the series of fixed term agreements.


Fixed term employment can only happen if:

  • The parties agree
  • The employment agreement says in writing the way that the employment will end
  • The employment agreement says in writing the reason for ending the employment in that way

Importantly, an employer must satisfy these requirements to rely upon the fixed term to bring employment to an end.

  • Genuine reasons (reasonably held) that the fixed term is needed
  • Advise the employee how the employment will end
  • Advise the employee why the employment is ending in that way

How does this affect me?

The Court’s ruling has set a precedent that has clarified the requirements for a valid fixed term, particularly where the employer is using it as a means of managing financial uncertainty.

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