Key Points:

Fixed-term employee agreements should be handled carefully to avoid being in breach of the Employment Relations Act, says Peter Kiely, employment lawyer.

"The law says that after a period of time, a fixed-term agreement will actually become permanent."

Section 66 of the Employment Relations Act of 2000 covers fixed-term agreements, which are meant to allow employers to hire someone for a one-off project or to cover paternal leave.

Kiely says fixed-term agreements must be for genuine reasons, based on reasonable grounds. It is illegal to have a fixed-term agreement which is being continually renewed or extended.

It's not unusual for these cases to go to court but most do not. The Department of Labour offers free mediation services in these circumstances.

Kiely has represented both sides in these types of cases. Employees contracted for a fixed period of time generally are not paid employer contributions into their superannuation fund and might feel compelled to do more discretionary work in order to have their fixed-term agreement contracts renewed.

Sometimes when fixed-term agreements are renewed or rolled over, there can be disputes as to whether it should be a permanent position.

"Ninety per cent of all mediations are settled. It's only 10 per cent that go on to the Employment Relations Authority and the court."

Kiely says it is illegal to use fixed-term agreements simply to avoid having permanent employees.

"You can't use a fixed-term agreement effectively for a sham or a reason not to have permanent employment."

He says that if an agreement is renewed, the original reason for putting the worker on a fixed-term agreement needs to be analysed to determine if that reason remains legitimate.

"Once you get on to the third or more sequential contract, the person who's on the one-year contract that has been sequentially agreed starts to have an ongoing expectation of employment," Kiely says.

Generally, when employing someone, a full-time permanent position is the norm. It is the employers' responsibility to show that there are exceptional circumstances which dictate that a temporary arrangement is necessary. Temporary agreements are commonly used in the education sector, where a school might hire a teacher to conduct a course for one term to test its popularity.

"Unless the university or any employer can successfully argue that there is a genuine and proper reason for a fixed term, it is difficult to argue that sequential appointments haven't created a legitimate expectation of permanent employment," Kiely says.

If there are problems which the employer and employee can't resolve, then there are steps to take. First, go to mediation. If necessary, go the Employment Relations Authority and possibly even to the Employment Court.

"It really becomes a factual analysis of what was discussed with the party and what documents were executed by the party but that doesn't stop the law from coming in over the top and examining it and determining whether in fact the fixed-term contract or agreement was genuine or whether the employer is just using it on the basis of renewing it every year."

The outcomes of these disputes vary. If the decision is in favour of the employee then the employer might be ordered to make a payout.

"The starting point is three months' salary."

This may be increased based on the person's ability to gain employment following the case. But a payout doesn't last long compared to full-time employment and most people just want to be reinstated in their jobs.

"There are numerous examples where universities and colleges of education have been ordered by the court or the Employment Relations Authority to continue the employment of someone or pay damages to the employee whose employment has been ostensibly and unfairly terminated on the basis that is was a fixed-term contract," Kiely says.

Rolling over fixed-term contracts year after year is clearly questionable, but Kiely says much shorter periods will also draw attention.

"On a third or subsequent 'renewal', the court is going to look at it much more closely," Kiely says.

Extending fixed-term agreements is a warning sign to the employee that they could be entitled to a full-time employment agreement. But initially taking on a fixed-term role may not be such a bad thing.

"The whole point of a fixed-term agreement is I am guaranteed employment and income for this fixed period," Kiely says.

The main thing is to make sure everything is laid out clearly at the beginning.

"The job applicant must fully discuss the reason for the fixed term and the job applicant must make sure that the employment agreement sets out very clearly the operational reason for the ending of the fixed term."