Casual vs. permanent employees – getting this important distinction right

The distinction between a ‘permanent’ and a ‘casual’ employee is an important one. The rights and obligations of both parties of the employment relationship are dependent on the type of employment relationship.

Most notably, an employee’s holiday pay and leave entitlements, and how an employer may go about ending the employment relationship, are different for casual employees versus permanent employees.

 

However, simply labelling an employment position as ‘casual’ or offering a prospective employee a casual individual employment agreement will not be definitive in classifying the nature of the employment. This is often a stumbling block for employers, and there can be significant consequences for employers who get it wrong.

 

In the recent case of Labour Inspector v Bennett [2019] NZERA 7, owners of a Canterbury pub were fined $30,000 for treating permanent part-time workers as casuals. Treating these employees as casuals rather than permanent staff meant they failed to comply with the Holidays Act 2003 by not providing them with annual holidays, sick leave and bereavement leave. The Employment Relations Authority noted that although the pub owners had no intention to disadvantage their employees, they had recklessly shut their eyes to their obligations under the Holidays Act.

 

The difference between casual employees and permanent employees

 

A casual employee has no guaranteed hours of work, or regular pattern of work, and has no ongoing expectation of employment. While an employer has no obligation to offer work to a truly casual employee, the employee likewise has no obligation to accept any work that is offered. In that respect it is of mutual benefit to both parties. Common indicators that suggest a ‘casual’ relationship is not truly casual is where an employer expects the employee to accept work when it is offered, and where the parties have become reliant on each other.

 

In relation to holiday pay, due to the uncertainty of a casual employee’s hours of work, it is usually more practical to pay an extra 8% of the employee’s gross earnings on top of their wages or salary as opposed to them accruing annual holidays. Casual employees are also entitled to sick leave and bereavement leave after 6 months of starting work if during that time they have worked an average of at least 10 hours a week at least one hour every week or 40 hours in every month.

 

Of utmost importance with a casual employee is that whenever the employee is offered and accepts work it is a new period of employment. Employers of casual workers have no obligation to continually offer work.

 

In that respect, an employer who ceases to offer a casual employee work has not technically dismissed them.

 

The key questions

 

  1. Is there an obligation on the employer to offer work, and subsequently an obligation on the employee to accept work that is offered?

  2. Is there a regular pattern of work?

 

What constitutes a regular pattern of work has not been defined by the employment institutions or in legislation. To assess whether there is a regular pattern of work factors of the employment arrangement will be taken into account, such as consistency in the number of shifts, the length of those shifts and how shifts are allocated.

 

If the answer to the above questions is yes, the employee is probably a permanent employee. Even if an employee starts on a casual basis, a change in the nature of the employment can see the relationship evolve into a permanent relationship at which point the employer owes the same obligations to the employee as all other permanent staff.

 

If your organisation offers casual employment work, or if you are an individual who is employed on a casual basis, it is important you understand the distinction between these two classifications of employment. If you have any concerns about this, including how casual employment agreements differ to those for permanent employees, please contact the Employment Team at Cavell Leitch for advice.

Author

Ari Barrow

Relationships and Employment – Solicitor

+64 3 339 5607

ari.barrow@cavell.co.nz

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