What are the legal risks of employing casuals?

If somebody is employed for casual work then the arrangement must be made clear in the employment agreement

What are the legal risks of employing casuals?

The term ‘casual employee’ is not defined in New Zealand employment legislation and the specifics around whether a worker actually is one can be open for debate.

However, a casual employee is typically somebody with no guaranteed hours of work, no regular pattern of work and no ongoing expectation of employment. The employer does not have to offer work to the employee and the employee does not have to accept work if it’s offered.

Moreover, if somebody is employed for casual work then the arrangement must be made clear in the employment agreement.

Consequently, legal risks for the employer can arise if the documentation is not entirely accurate, according to Hamish Kynaston, Partner at Buddle Findlay.

“It might be that you haven’t set up the casual relationship properly in a manner that is not truly casual, or you haven’t managed the relationship as a truly casual relationship,” he said.

Kynaston told HRD that it’s often a question of whether or not there is a “genuine offer of acceptance of work”.

“Can the individual freely turn down the work that’s offered to them? Do they have obligations to the employer that operate between engagements or are they free to do what they like when they like? Do they have to stay available? Do they start working regularly or frequently such that there is an expectation on both sides that, in fact, the work will continue?”

Kynaston said that when those questions start being raised there becomes a risk that the employee will be found to be a permanent employee rather than a casual.

Additionally, he said that it’s important to consider holiday and leave entitlements.

Since casual employees don’t have set hours, it may not be practical for them to take annual holidays.

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The employee and employer might concur that an extra 8% will be paid on top of their wages or salary instead of taking annual holidays.

Casual employees are also entitled to sick leave and bereavement leave after six months of starting work if during that time they have worked:

  • an average of at least 10 hours a week, and
  • at least one hour a week or 40 hours a month.

With regards to holiday pay, Kynaston said the Holidays Act imposes an obligation to provide holidays when the individual works beyond certain time periods.

“Generally speaking, with casual employees you are paying 8% on top as you go,” said Kynaston.

“This accounts for their holiday entitlement because it’s not practicable to offer them holidays because they are only working occasionally as and when required.

“But if the person turns out to be a permanent employee you might have paid them the 8%, then you will owe them holidays as well so they will in effect get a double holiday entitlement.”

The result is that rather than 8%, employers will end up paying 16% for their holiday entitlement, according to Kynaston.

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“The other risk is you can’t just say the relationship is over. In that sense, employers need to treat casuals as they would another employee. So they can only end the relationship for fair reasons and having followed a fair process.”

If an employer decides to stop offering work, this doesn’t count as a dismissal because the employer has no responsibility to provide work, according to NZ law.

However, if an employer sends an employee home in the middle of a shift or goes back on an agreement to provide work for a shift then this could mean that they were dismissed.

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