When a Fixed Term isn’t a Fixed Term

Fixed term employment agreements must meet strict requirements to be valid. Simply stating an end date in an agreement is not enough. This Employment Relations Authority (ERA) decision is a reminder of the requirements.

Mr Jiang was employed by Smartrade Limited (Yifu Jiang v Smartrade Limited [2026] NZERA 56), as an office clerk from October 2023. Two months after he started work, he was given a ‘fixed term’ written employment agreement that stated his employment would end on 11 December 2024, with two weeks’ notice. He signed the Agreement.

In November 2024, Smartrade emailed Mr Jiang advising that his employment would end on 11 December as stated in the Agreement, due to low sales and financial pressure. No consultation occurred, and Mr Jiang was not given an opportunity to comment on the proposal before the decision was made. Smartrade argued that it was entitled to end the employment because it was a fixed‑term agreement.

The ERA disagreed. Under the Employment Relations Act, a fixed term agreement is only lawful if:

1. The employer has genuine reasons, based on reasonable grounds, for the fixed term; and
2. Those reasons are communicated to the employee and agreed before the agreement is entered into; and
3. The written agreement clearly records both the end date and the reasons for the fixed term.

The ERA found there was no evidence that the fixed term was discussed with Mr Jiang before he signed the agreement. The written agreement also failed to state the reasons why the employment would end (i.e. why it was for a fixed term). The ERA commented that the reasons later relied on (business uncertainty) were vague and unlikely to meet the legislative threshold in any event.

Because the fixed‑term agreement was not lawful, Smartrade could not rely on it to end the employment. The email advising Mr Jiang his role was ending amounted to a dismissal, and no fair process was followed. The Authority found the dismissal unjustified and ordered Smartrade to pay:

$15,600 in lost wages

$12,000 for hurt, humiliation and injury to feelings

Fixed term agreements can only be used in limited circumstances, such as genuine project work, a seasonal requirement, cover for parental leave, or a clearly defined temporary need. Using a fixed term to manage business uncertainty or ‘see how things go’ is not considered to be a ‘genuine reason based on reasonable grounds’.

Fixed‑term agreements must be genuine, specific and agreed upfront. The reason for the fixed term must be written into the agreement. Ending a fixed‑term employee’s role without a lawful fixed term still requires a fair process.

If a fixed term is invalid, the employee is treated as permanent.