An employer has an obligation to provide their employees with a copy of the employee’s employment agreement under the Employment Relations Act 2000. The structure of the written employment agreement is essential in ascertaining the employment relationship and in ensuring that the parties are aware of their rights and obligations.

As there are various ways that an employment relationship is structured, the employment agreement should reflect the real nature of the employment relationship. This is critical in ascertaining the employee’s rights and obligations and their statutory entitlements, such as their leave entitlements. The most common employment structures are as follows:

1. Permanent employment;
2. Fixed term employment; and
3. Casual employment.

Permanent employees are contracted to work indefinitely and may work full-time or part-time. They will have greater statutory leave entitlements under the Holidays Act 2003, such as:

1. Annual Holidays;
2. Sick Leave;
3. Bereavement Leave;
4. Family Violence Leave; and
5. Parental Leave.

The amount of leave that a permanent employee is entitled to will depend on the number of hours they
work each week.

Unlike a permanent employee, a fixed-term employee is contracted to work for a finite period of time. As such, the employment agreement must state when, how and why the employment relationship will end at a certain time. The reason for the employment relationship ending must be based on reasonable grounds.

This will depend on the circumstances of each case. If there is no genuine reason, then the employee may be deemed to be a permanent employee. Fixed-term employees also have various statutory leave entitlements under the Holidays Act 2003, as specified above. Their leave entitlement will depend on the duration of their employment relationship, and the number of hours they work each week.

A casual employment relationship describes standalone engagements where there is no guarantee or expectation of continuing employment beyond that engagement. Rather, it is an employment on an as and when needed basis that is entirely dependent on the availability of work. Employees are only engaged for the specific term of each period of employment and are not terminated at the end of each period of engagement. Because of the nature of casual employment, an employee’s ability to raise personal grievances is limited, but they are still entitled to leave under the Holidays Act 2003.

An individual employment agreement is an agreement between the employer and the employee. An individual employment agreement must include the following information:

1. the names of the employee and the employer concerned;
2. a description of the work to be performed by the employee;
3. an indication of where the employee is to perform the work;
4. any agreed hours of work or an indication of the arrangements relating to the times the employee is
   to work;
5. the wages or salary payable to the employee; and
6. information on the services available for resolution of employment relationship problems.

The employer will need to consider the following:

Job Description

An employment agreement must provide a job description with sufficient information on the work that is to be performed by the employee.

Payment

An employee must be remunerated and paid in accordance with the employment agreement. There are minimum requirements for payment pursuant to the Wages Protection Act 1983, the Minimum Wage Act 1983 and the Holidays Act 2003.

Hours of Work

The employment agreement must provide the employee’s guaranteed hours of work or an indication of the hours of work that the employee must be available to work. This includes the days of the week that the employee must work, the employee’s start and finish times of work and any flexibility in these matters. Casual employment agreements may vary as the employee may not have any guaranteed hours of work.

Leave Entitlements

An employment agreement should set out an employee’s leave entitlements, including the period of continuous employment at which the employee begins to accrue leave, the amount of leave that the employee is entitled to and the notice period that the employee must give to the employer to apply for leave.

Termination

When terminating an employment agreement, an employer will need to follow a fair and reasonable process. An employer is unable to terminate an employee’s employment unless there is both a genuine reason for doing so (also known as substantive justification), and a fair process is followed (which is also known as procedural fairness). A fair and reasonable process may be outlined on the employment agreement, but typically involves consultation with the employee and a reasonable opportunity for them to respond. A fair and reasonable process depends on the circumstances of each case rather than the provisions of an employment agreement. A termination provision may include the notice period, the employer and employee’s obligations upon termination (such as the return of property) and the method by which notice is given. An employment relationship may be terminated without notice if there is serious misconduct. This can be provided for in the employment agreement. When dealing with serious misconduct, an employer must follow a proper process. Serious misconduct can include, but is not limited to, the following:

1. A serious breach of the employee’s code of conduct;
2. A serious failure by the employee to comply with any applicable provision of the Health and Safety at
   Work Act 2015;
3. Unauthorised use or possession of the employer’s property;
4. Consumption of alcohol or drugs during work hours (including lunch breaks);
5. Sexual harassment;
6. Any breach of confidentiality provisions; and
7. Bringing the employer into public disrepute.

Redundancy

Like the termination process, a redundancy must be based on a genuine reason and the employer must
follow a fair and reasonable process. This will depend on the circumstances of each case, but typically
involves consultation with the affected employees on any proposals. The employer will need to provide
evidence of the reason that they are considering a redundancy.

If an employer wishes to do so, they may provide an employee with redundancy compensation. An
employment agreement may provide for the amount of redundancy compensation relative to the duration
of the employee’s continuous employment.

Restraint of Trade, Confidentiality and Non-Solicitation

An employer may wish to protect their interests upon termination of the employee’s employment. Some examples include a restraint of trade clause, a confidentiality clause and a non-solicitation clause.

A restraint of trade clause provides that the employee is unable to set up a competing business within a certain geographic constraint (usually a geographical radius from the employer) for a certain period of time. It is important to note that a restraint of trade must be reasonable otherwise it will be unenforceable.

A confidentiality clause prevents the employee from using any confidential information that they obtained in the course of their employment once the employment relationship ceases. This will need to be express and will only be upheld to the extent that it is reasonable.

A non-solicitation clause aims to prevent the employee from initiating contact with the employer’s customers, clients or other employees. A non-solicitation clause does not prevent a customer, client or other employee from initiating contact themselves.

Employment Protection Regime

This clause will apply in the event of a restructure. If an employer wishes to do so, they may engage in negotiations with a prospective new employer to reduce any impact of change on an employee that is affected by a restructure.

Entire Agreement Clause

An entire agreement clause ensures that any terms agreed to outside of the employment agreement has no effect and the parties will be unable to rely upon them.

A collective employment agreement involves one or more union. There are three main types of collective employment agreements:

1. Collective Employment Agreements that apply to a particular enterprise or a single workplace;
2. Multi-Employer Collective Agreements that cover a number of employers; and
3. Multi-Union Collective Agreements that are binding on any union members in that particular workplace.

A collective employment agreement must:

1. Be in writing and signed;
2. Contain a coverage clause that states the type of employees and the jobs that are covered;
3. Provide for rates of pay;
4. Contain mandatory clauses about personal grievances, such as the explanation of services available for the resolution of employment relationship problems, including a reference to the period of 90 days;
5. A clause providing how the agreement can be varied; and
6. The date on which the agreement expires or an event on the occurrence of which the agreement is to expire (a maximum of three years).

Collective employment agreements are signed after a union and employer engage in good faith bargaining. This involves setting out the terms and conditions of the agreement.

Independent Contractors are not required to have an employment agreement as they are not considered employees. They typically operate under an Independent Contractor’s Agreement and are responsible for their own taxes and invoicing.

It is important to note that contract is not determinative of the employment relationship. If a person is working under an Independent Contractor’s Agreement, but the nature of their work suggests that they are an employee, then they may be deemed to be an employee regardless of what the contract provides.

Whether a person is an employee or an independent contractor will depend on the circumstances of each case, including, but not limited to:

1. Which party has the right to control the work;
2. Whether the party performing the services is working on his or her own account or on behalf of a business;
3. The real intention of the parties when they entered into the agreement;
4. Whether the contractor is part and parcel of the business; and
5. The circumstances before the parties entered into the contract, and what have the parties done
   since then.

If a person is deemed to be an employee, they must have a written employment agreement with the
corresponding entitlements and protection under the Holidays Act 2003, Wages Protection Act 1983 and
Employment Relations Act 2000.

Please note this guide does not constitute legal advice and your employment agreement will depend upon
the circumstances and structure of your employment relationship.

Please get in touch with our friendly team if you have any questions or would like assistance in drafting up
your employment agreement.