Valid fixed-term agreement based on external funding - Employment Update - Week 4, July


Valid fixed-term agreement based on external funding

In a recent determination, the Employment Relations Authority found that a fixed-term employment agreement based on funding amounted to a genuine reason for fixed-term employment and on reasonable grounds. The employee had been employed as a teacher aide at a school providing support to students with special learning needs. Part of the employee’s hours were subject to a fixed-term arrangement which was based on student needs and associated sources of funding from external sources.

The Authority accepted that the School had very limited funding to pay for the staff that it employed. Unlike a business, the School was not able to “tout for business” to supplement its income. The Authority found that the receipt of funding by the School, the level of that funding and the timing of funding regularly fluctuated due to a number of factors.

In coming to its decision, the Authority distinguished another decision of the Authority which had been made 14 years earlier and had come to the contrary conclusion that fixed-term agreements based on funding were for genuine reasons but were not based on reasonable grounds: New Zealand Educational Institute (Inc) v Board of Trustees — Red Beach School ERA AA437/05, 7 November 2005. The factual circumstances in the earlier Red Beach School decision were very similar in many respects, including that the employee in that case had also been employed as a teacher aide at a school providing support to students with special learning needs. However, the difference was that the Authority in the Red Beach School determination had been persuaded that roll stability at Red Beach School in the unit dedicated to students with special needs was stable. There was a waiting list for students to enter the area. In the present case, however, the school did not have a waiting list of children available to replace those children that left, nor did it operate a special unit for special needs children. The Authority concluded that the school had genuine reasons for employing the employee on a fixed-term basis and that decision was a reasonable one in all of the circumstances.

The different outcomes of the two Authority determinations demonstrate that the issue of whether external funding provides a genuine reason for fixed-term employment based on reasonable grounds is not clear-cut. Rather it seems to be a contextual issue which will depend on the factual circumstances. In addition, a recent decision of the Employment Court (Morgan v Tranzit Coachlines Wairarapa Limited [2019] NZEmpC 66) also explored the issue of a fixed-term agreement based on funding and concluded the external funding did not amount to a sufficient genuine reason based on reasonable grounds.



See De L’isle v Board of Trustees of Glamorgan School [2019] NZERA 198.


Reproduced by permission of Wolters Kluwer NZ



Valid fixed-term agreement based on external funding. Call 0800 bossed for employment relations advise
A fixed-term employment agreement based on funding amounted to a genuine reason for fixed-term employment and on reasonable grounds.

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