A recent decision from the Employment Court serves as a reminder to employers to ensure that fixed term employment arrangements are made for genuine reasons.
In Tillmans Fine Furniture v Rookes [2025] NZEmpC 152, the Employment Court considered whether a fixed term agreement entered into shortly after dismissal under a 90-day trial period complied with the requirements of the Employment Relations Act 2000 (Act).
The Employment Court found that while the employer’s intentions may have been sincere, the fixed term arrangement was not based on reasonable grounds.
Legal framework
Under section 66 of the Act, a fixed term employment agreement allows an employee and employer to agree that the employment will end:
- on a specified date; or
- on the occurrence of a specified event; or
- at the conclusion of a specified project.
The Act states that, to justify limiting an employee’s employment to a fixed term, the employer must:
- have genuine reasons based on reasonable grounds; and
- advise the employee of when or how their employment will end and the reasons why.
Examples of genuine reasons for fixed term employment include covering an employee on parental leave and completing specific projects.
Employment Court decision
Ms Rookes was initially employed by Tillmans Fine Furniture Ltd (Tillmans) in a permanent role, subject to a 90-day trial period. She was dismissed during the trial period due to concerns about her product knowledge. Days later, she was re-employed on a two-month fixed term agreement. Tillmans’ reason for this was to provide Ms Rookes with income over the Christmas period and time to find another job.
The Employment Relations Authority found that the fixed term agreement did not comply with section 66 of the Act. The employer’s desire to help Ms Rookes by employing her on a fixed term basis was not a genuine reason based on reasonable grounds, meaning Tillmans could not rely on the fixed term expiry to end her employment. Because Tillmans had not followed a process, the Authority held that Ms Rookes had been unjustifiably dismissed. Ms Rookes was awarded $15,000 in hurt and humiliation compensation and three weeks’ lost wages. Tillmans challenged that decision in the Employment Court.
The Employment Court dismissed the challenge and held that while the employer’s intentions may have been sincere, the fixed term arrangement was not based on reasonable grounds. The Employment Court found that:
- the employer had an ongoing need for a sales consultant and simply did not want Ms Rookes in the role;
- the fixed term was used to avoid the obligations of permanent employment, including the risk of a personal grievance; and
- the arrangement deprived Ms Rookes of statutory protections, which is expressly prohibited under section 66(3) of the Act.
The Employment Court confirmed that a genuine reason must be both sincerely held and objectively reasonable. Even well-intentioned arrangements can be unlawful if they are not grounded in a proper purpose.
If you have any queries in respect of the above, please do not hesitate to contact a member of our specialist Employment Team.
