The Case of the Fixed Term Agreement that Wasn’t.

Fixed term employment agreements are essential tools for any business. They are needed to cover the positions of employees on parental leave. They are used to cover seasonal fluctuations in business and special projects. However, the Napier company, Alexander Construction Company Limited has learnt that a fixed term agreement that in law isn’t a fixed term can cost the proverbial arm and a leg.

A fixed term that isn't, can cost an arm and a leg

A visit to this company’s website says that if this company can’t get a fixed term agreement right then many companies won’t and haven't.

Ms Shortland, the employee, did clerical work in the company’ main office. They offered her a site administrator position at the Elephant Hill project on a fixed term contract that said the agreement would end “on the completion of the Elephant Hill project”. The agreement said that she had been advised of the reasons for the fixed term and that they were genuine and based on reasonable grounds.

Not only did the agreement say these things but also I reckon it had been penned by the company’ lawyer. You might wonder what then could go wrong. Well this is a story about the legal hurdles you need to jump and when is a project complete or not complete.

During the 10 months following the appointment, Ms Shortland took on the health and safety role on site. Now there was nothing unlawful about this. These things happen at work. However, when the company came to her in the 10th month and said that her job would be soon over when clearly the project was far from complete, she developed a mild case of angst. The company said that it was “decamping from the work site” and would be managing the project from the main office. As for her work, the administrative and health and safety responsibilities transferred to the manager and the site foreman.

Judge Couch [1] found that at the time the agreement was made there were genuine reasons for the fixed term in that the company had no significant work in prospect other than at Elephant Hills. However, the company had to show that they had told Ms Shortland this and they couldn’t. Further, the company’s use of the words “completion of the Elephant Hills project” did not go far enough. The company should have said that that the agreement is to end at that time because there was no other work in prospect. But wasn’t the dispute over the meaning of “the end of the project”? Yes, partly, but the company had already fallen at the first legal fence and the fixed term agreement “had been put down”. As for the meaning, the company said “decamping = completion”. “No”, said Judge Couch, “completion = finished”.

In desperation the company tried to get on the back of the nearest riderless horse, by claiming Ms Shortland was redundant. “No”, said Judge Couch, “redundancy was an explanation [the company] sought to rely on after the event. It was not the basis for terminating her employment”; and, “given a significant part of her work remained to be done, it would not be realistic or proper to speculate on what might have happened if the company had consulted her, which it had not”.

The moral to the story is that if you need a fixed term agreement get advice and throw this blog on your lawyer’s desk.

[1] Julie Shortland v Alexander Construction Company Limited [2010] NZEMPC 41. Ms Shortland was awarded $15,447 in lost wages and compensation. She would also have got a contribution towards her costs and of course the company had to meet its own costs.