90 day trial periods

90 day trial periods

The recent amendments to the Employment Relations Act 2000 extend the 90 Day Trial Period to all Employers (previously it was limited to those Employers with 19 Employees or less). 

Key points regarding the 90 day trial period:

 

1.   Basic principle

An Employer can dismiss a new Employee within the first 90 days of employment without risk of a personal grievance as a result of that dismissal if the trial period applies.  There can be disqualifying behaviour, and it is unlikely that an Employer can ignore all of the usual obligations.

2.   Exceptions

Although a personal grievance may not be brought simply as a result of dismissal, it does not exclude personal grievances for:

  • discrimination for reasons of race, religion, sex, union membership, age or the like, or
  • unjustified actions prejudicing the Employee during the trial period

3.   In Employment Agreement

The 90 day trial period will only apply if the Employment Agreement includes a reference to the trial period. In Smith v Stokes Valley Pharmacy (2009) Ltd [2010] the Chief Judge of the Employment Court found that the Employment Agreement containing the trial period must be signed prior to the commencement date of the Employee.

A recent Authority decision illustrates that both parties should sign the agreement prior to the commencement date.

4.   New Employees only

The trial period provisions only apply to Employees new to the Employer (so does not include returning or existing Employees switching roles). In the Stokes Valley Pharmacy case, because the Employee signed the Employment Agreement the day after she started work she was not regarded as a new Employee.

5.   Notice

An Employer must give notice of termination within the 90 day period. The notice period can expire outside the 90 day period but notice must be given within it. To give notice, the Employer must identify the Employee’s last day of employment.

The notice period will be the usual period contained in the Employment Agreement unless another period is included in the trial period clause (the notice period may be shorter for a trial period, provided the Employment Agreement specifies that).

The Employment Agreement may allow an Employer to place an Employee on ‘garden leave’ or pay them in lieu of notice, but remember during the notice period they are still an Employee. It is good practice at least to consult on the issue of whether the Employee works out the notice period.

6.   General obligation of good faith continues

The obligation to consult an Employee about a dismissal is removed during a trial period but the Stokes Valley Pharmacy decision confirmed that the general obligation of good faith continues.  In that case the Employer was held to be in breach of this general obligation for refusing to tell the Employee why she was dismissed at the time, even though the Employer is not required to give grounds of dismissal if sought under s120 of the Act.

We recommend that an Employer follow the usual process as much as possible. The Employer should give the Employee at least some warning during the trial period that they are not measuring up.

Note:  if the trial period clause in the Employment Agreement requires consultation the Employer must follow that obligation.