Making the most of the 90 day trial period

The new Employment Relations Amendment Act 2010, which came into effect on 1 April 2011, extended the 90 day trial period to all employers; prior to the amendment only those with fewer than 20 staff qualified.

The Employment Relations Act legislation requires that in order for a trial period provision in an employment agreement to be valid, the agreement must be in writing and state:

  • that it is for a specific period not exceeding 90 days starting at the beginning of the employment, and
  • that during the period the employer may dismiss the employee, and
  • if the employee is dismissed they are not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.

If any of these elements are missing the trial period is not valid. In addition, the trial period provision provides that the employee has not previously been employed by the employer.

Since the enactment of the trial period provision, there have been several cases heard through the employment courts that give some clarity of interpretation to this legislation.

In Parkes v Squires Manufacturing Ltd, a recent personal grievance case, the employee received her employment agreement before starting work and signed it at lunchtime on her first day of work. The employer signed it a week later. The Employment Authority found that, as the employee had already started before signing the agreement, the trial period clause was not valid.

In Smith v Stokes Valley Pharmacy (2009) Limited, the Employment Court tested the 90 day trial period and applied a very rigid interpretation, which now provides the ground rules for employers. The court concluded that the employment agreement must include the trial period provisions (as stated above) and must be signed by both parties before the commencement of the employment.

It was also concluded in the Smith v Stokes Valley Pharmacy case that although the employee cannot claim wrongful dismissal, they are still entitled to the protection of the good faith provisions of the Employment Relations Act. These require the employer and employee to be communicative and responsive in their relationship. The employer is not required to give reasons for the dismissal in writing but they are required to give the employee feedback so that they can learn from the unsuccessful trial and hopefully have greater success with their next role.

The Judge also looked at the issue of notice with respect to the trial period and concluded that notice can be given during the 90 day period for the employment to terminate after the 90 days. However, in the event of an unsuccessful trial there is no provision for ‘payment in lieu of notice’ or ‘termination without notice’. Thus the notice period must be worked out, unless the parties agree to it being paid in lieu at the time that the employee is given notice.

In essence, the trial period provides a level of protection if you have sincerely endeavoured to meet the standards expected of a ‘fair and reasonable’ employer.

Published Spring 2011.

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