By Vaughan Granier 

Did you know…

  • that during the 2020 and 2021 New Zealand COVID lockdowns, thousands of health workers had their hours slashed, leaving them with little income and difficulties obtaining relief subsidies?
  • the term ‘casual employee’ isn’t specifically defined in employment legislation?
  • each time a casual employee accepts an offer of work it is treated as a new period of employment?

Plenty of us running a business rely on casual employees during temporary peaks in demand, or to cover short–term absences. If you’re in the retail, warehousing, manufacturing, hospitality, or cleaning industries, you may use casuals.

Casual employees typically:

  • Do not have to say yes when asked to work;
  • Have no expectation of regular or ongoing employment; and
  • Get paid their annual leave entitlement as an extra eight per cent of their ordinary pay paid on termination.

However, there are some potential challenges when an employer chooses to onboard a casual worker to become permanent.

Here are three hypothetical scenarios that illustrate casual workers:

  • A casual employee named Billie works in retail. The store that Billie works at has consistently high demand on Fridays and Saturdays. Gradually, other casuals, who are less reliable, stop getting calls, and Billie becomes the go-to person for Friday and Saturday shifts. Eventually, she is working every Friday and Saturday and is not even called anymore to come in – she just arrives. After a year or so, COVID-19 hits and the store has to downsize. All the permanent employees are formally consulted, and the employer does a great job of following redundancy process. But, the head office doesn’t include Billie, because she’s a casual.
  • Lee is a casual transport sector worker. His father has cancer and occasionally Lee needs to take him to the hospital for treatment. Lee gets permission to do this and leaves early some days as a result. On those days, offloading trucks is a challenge. After three months the other two casual employees get offered permanent contracts and Lee is told the company doesn’t need him anymore – despite many other permanent employees there starting out as casuals.
  • For almost a year, casual cleaner Carmen has worked at a hotel every Friday, Saturday and Sunday. It is her main source of income and she is expected to work every weekend. Sometimes she works with permanent employee Suzie. A month ago, Carmen was sick and told she didn’t have any right to sick pay. Then, after a guest complains of an item missing from a hotel room Carmen and Suzie had cleaned, Suzy is disciplined and the hotel says to Carmen she won’t be working there anymore and gives her notice.

Did you know what has happened in each of these cases is a breach of employment law?

The thing in common here is casuals are the easiest kind of employees with whom a business can make mistakes without even realising it.

Pay attention: casual workers can become permanent without any paperwork or announcement – just through their working conditions

In the cases of both Billie and Carmen, the reality is that, at some point, they had shifted from being casual, had lawful expectations of ongoing employment, and couldn’t refuse to work.

Despite the fact that their written contract of employment was a casual contract, they were no longer, in fact, casual employees.

In employment law, the default employment relationship is “permanent”. So, if someone starts working, for example, with nothing in writing and nothing really discussed except a rate per hour, then they are a permanent employee. If the relationship is not meant to be permanent, you have to agree specifically what it is.

When the working conditions of a casual contract are no longer  happening, and nothing has been discussed, Carmen and Billie became permanent employees even without a written contract. They became permanent part-time employees rostered on regular working hours.

In Lee’s case, the employer tried to use a ‘disguised’ trial period. This is a breach of the law. It’s plain and simple: a casual contract may not be used to test employees instead of a trial period or probation period.

In these cases: 

  • The employers didn’t have the correct written contract, so the employer was in breach by not having proper documentation.
  • They were not accruing annual leave in payroll (even if they were paid 8 per cent) – they were entitled to accrue annual leave and take paid annual leave.
  • Public holiday provisions become applicable, as permanent employees, so the worker’s public holiday pay might now be incorrect, as well as the alternative days accrued by working public holidays;
  • In Carmen’s case, she was entitled to sick leave, as she had fallen ill after six months employment on her normal working days, but was not paid (this can also happen with bereavement leave, and family violence leave).
  • Lee was actually a permanent employee (not even on a probation period!), and his employers never raised issues with him about their concerns over leaving early to care for his father.

Courts work in hindsight and work on reality, not theory. Despite what a written contract says, and even if an employer complies with the termination obligations in the casual contract, the courts will look behind the contract, to what was actually happening in the workplace and the relationship.

A court might conclude the employer should have acted differently based upon the REAL employment relationship, not the written contract.

The casual employees in this case were entitled to the following:

  • Billie was, in hindsight, a permanent part-time employee and had as much right to be consulted about the impact of restructuring as any other employee. To exclude her from that process was unfair, and when her position was terminated to make way for a permanent employee to remain, she was unfairly dismissed. Billie was paid one week notice under the casual contract. What she should have been paid was four weeks’ notice. She was not paid out her accrued annual leave or alternative days (of which, in hindsight, the employer never kept a record – another breach.) Also, excluding her publicly (in front of her colleagues) from the redundancy process would have been humiliating and distressing, and the court could award her damages for that.
  • In hindsight, Carmen was a permanent part-time employee as well. She was entitled to fair disciplinary processes and should not have been terminated on one week’s notice without being given the same rights and consequences as Suzie. Her dismissal was therefore unfair.
  • Lee was actually never a casual employee. He was, in reality, employed as a permanent employee with no probation period. This is because there is no probation period – or trial period – if it’s not written into the contract of employment! His contract was a casual contract and had none of these provisions! So, in hindsight, because the casual contract was not, in fact, a casual contract, but an attempt to disguise a trial period, Lee was a permanent, full time employee from day one, and could not be dismissed fairly except through proper discipline, performance management, or restructuring processes!

Guidance awaits, with HR Assured’s experts costing far less than an employment lawyer – and minimising risk of mistakes

Employers with the best intentions can be caught out by the rush and demands of managing the workplace, and not even realise that they’ve stepped across this line.

Therefore, it is essential that business owners and managers understand a casual contract well, and use these contracts only for the purpose for which they were designed: to support a business at random times of peak demand or staffing shortfall.

HR Assured’s HR software, HRA Cloud is full to the brim with various HR and employment templates and documents – they’re ready to use, compliant and always up to date.

If you’d like to know how HR Assured can assist your business with an employment relations or HR matter, contact our experts today.

Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 10 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.