When is a casual not a casual?

This is a question that has been troubling employers for many years with decisions often being made on incorrect information and assumptions – so where is the line drawn? 

Employing staff on a casual basis has long been held as a simple solution to a flexible workforce requirement. Genuine casual employees do not incur the same costs as their full-time or part time colleagues under the provisions of the Holidays Act 2003 and can generally be released when they are no longer required by simply not making any further offers of employment (work) to them. 

Although a casual employee is still required to have a signed-written employment agreement, given the nature of the arrangement each period of work is in effect deemed to be a period of employment. For this reason, outside of the ending of a fixed term agreement, casuals are the only other category of employees who are legally entitled to receive ‘pay-as-you-go’ annual leave payments. These are calculated at a rate of 8% of the employee’s total gross earnings for each ‘period of employment’ – generally the period of employment is taken to be from one regular payroll date to the next. The ability to pay casual employees on this basis is due to the fact that there is no obligation for the employer to make any further offers of employment within the next payroll period – and in reverse, there are no obligations on the casual employee to accept any offers of employment (work) in the next payroll period. 

While this all seems simple, the problem arises when the casual employee does perform work from pay period to pay period and a pattern of work may begin to emerge. 

The Employment Relations Authority have deemed that a casual employee may in fact become permanent in as short as three to four weeks, based on the establishment of a ‘pattern of work’. 

The pattern of work will be noticeable if the employee is offered, and they accept, opportunities to work on the same day of the week for three to four consecutive weeks. Where this pattern begins to emerge beyond this length of time the employee may form a belief that this is now a ‘regular’ day of work and that they hold an expectation that they would be required to work on that day each week thereafter. 

However, a pattern of work may also be established through the employee being offered and them accepting a similar number of work hours each week – although these may occur on different days of the week. 

In both of the above cases, the patterns being established may be more akin to a permanent part time worker (rather than a genuine casual) whereby the employee is able to claim regular days of work (Permanent Part Time) or regular weekly hours of work (Permanent Flexible Part Time). Under both scenarios the employee’s annual leave entitlements legally move from ‘pay-as-you-go’ to accumulating at a rate of four weeks per annum. Section 28 (4) of the Holidays Act 2003 confirms that, if the employee by default becomes permanent, and you continue to pay them annual leave on a ‘pay-as-you-go’ basis, the employee will be entitled to payment of accumulated leave ‘despite the payment already made’. This could result in a ‘double-dipping’ outcome if changes to the employee’s arrangements are not made in the payroll system when the change of status is first noted. 

In addition, casual employees who establish a ‘pattern’ of work may have a legal right to claim payment for a non-worked Public Holiday that falls on one of their ‘regular’ days or even a paid alternative day if they work on that Public Holiday. When either of these entitlements occur, this would further reinforce that the ‘casual’ employee is no longer a genuine casual. 

How do you prevent this occurring if you genuinely only want a causal employee? 

There are two simple steps to preventing the inadvertent migration of the causal worker to permanent. The first occurs within the drafting of the employment agreement where the onus falls on the employee to alert the employer immediately to any belief that permanent hours or days are being established. 

While this is not fool proof, it would provide some mitigation against a claim where the employee did not bring this belief to the employer’s attention, to allow the employer to adjust the employee’s hours first. 

The second and most thorough method is through payroll monitoring. This being where the payroll administrator holds the responsibility to monitor the workdays and hours of casual workers, alerting the employer or direct manager of the emergence of a pattern of work when this is first identified. This would allow the employer/manager to make adjustments to the offer, or even withholding providing offers for a short period, in order to break the perceived pattern from developing. 

Problems (grievances) can often emerge within restructuring processes where the status of the casual worker is not thoroughly considered, and they are not then subjected to the same level of consultation that would be afforded to the permanent workers. In such case the termination of the casual workers employment may be found to have been unjustified. 

A recent Determination of the ERA confirmed the level of liability that exists where decisions on a casual workers ongoing employment may have been based on false assumptions regarding their employment status –

27 March 2023 [2023] NZERA 149

If you have any doubts regarding any of the following:

  • the genuine status of a casual worker, 
  • you are uncertain as to whether your Casual Employment Agreement template contains all required protective clauses, 
  • or are needing to make decisions that could impact the ongoing employment status of a casual worker,

 please feel free to contact us directly to discuss, prior to making any direct decisions.

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