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Ninety day trial periods in a nutshell

NINETY DAY TRIAL PERIODS IN A NUTSHELL

A break down on the law and how it applies to you.

As of 1 April 2011 all new employees are subject to a 90 day trial period. This allows an employer to terminate an employment relationship within the first 90 days without reason and without risk. However, in order to successfully use the legislation the trial period must be in writing, agreed to in good faith and recorded at the start of the agreement. It is important that both employers and employees know how trial periods work, because they are not as simple as they appear.

Basically trial periods involve a trade off; on one hand the employee’s loses the right to challenge unfair dismissal, and on the other an employer’s freedom in drafting the terms of their employment agreements is lost. 

The law is set out in ss 67A and B of the Act. Its limits are currently being thrashed out in the courtroom in a series of cases: Smith v Stokes, Parkes v Squires Manufacturing Ltd, and Blackmore v Honnick Properties Ltd. In all of these cases the Courts are making it clear that if the law isn’t followed to the letter employers cannot rely on this legislation. 

Breaking it down

The logistics and legal jargon of 90 day trial periods may seem a bit of a maze but here we break down the definitions, key features and a simple checklist to guide you through. 

A TRIAL PROVISION 

Is a clause in an employment agreement which provides for a trial period (ninety days or less) commencing at the beginning of the employee's employment. 

AN EMPLOYEE

Is an employee that has NOT previously been employed by that employer

WHAT’S IN A NAME ?

Not much… as long as the description of the period and its features are accurate. In Court both a “probationary period” and a “3 month trial period” has been held to be the same. It will be legally accepted as a “trial period” if described in terms that clearly refers to the law of 90 day trial periods. To avoid confusion, we advise you to describe the provision in your contracts in the same terms as it is in the Act; a “trial period” not exceeding 90 days.

KEY FEATURES THAT MUST BE REFERRED TO ARE…

The possibility of dismissal and non-entitlement to bring a personal grievance

•The provision will not work unless it clearly states that the employer can dismiss the employee in the first 90 days AND that there will be a non-entitlement to bring a personal grievance in those 90 days. 

•If the provision does not mention the above it is classified as a “probationary agreement” and the law relating to unjustified dismissal applies. 

TIP: If you want the protection of a 90 day period you must state these elements; if not you may find yourself in the firing line. 

Timing of written agreement 

In Blackmore v Honnick, a previously unmentioned trial provision was inserted into the written agreement of a person who had earlier been VERBALLY offered the job and had accepted in the same manner. The Court held that he was already an employee (even though he had been employed on the basis of the verbal contract for only one hour). 

TIP: Timing is crucial; the provision must be in the contract and acknowledged BEFORE the person is employed. 

When do the 90 days start?

•The 90 days don't have to start when the agreement is signed. They can start on the day work starts if outlined in the trial period description as such. In such a case an employee could still bring a personal grievance if the employer withdraws the offer of employment before they start work. 

TIP: Be clear as to when the period starts; if you want it to start on the day the contract is signed you must say so. 

Strict interpretation 

•The Court made it clear that trial periods require STRICT INTERPRETATION given that they effectively give significant advantages to an employer by removing the employer’s right to challenge unfair dismissal. 

•The Courts have specifically referred to the series of steps that employers must go through in order to create a watertight 90 day trial period, and the risk that is faced in trying to rely on the legislation if they didn’t follow the steps. We have turned these into a 6 point checklist for you. 

TIP: Cover your bases, follow the steps, check the list. 

COVERING YOUR BASES CHECKLIST

1.Make sure the employee hasn’t been previously employed by the employer (particularly if purchasing a business with existing employees). 

2.Ensure the trial period provision is included IN WRITING in the employee’s employment agreement. 

3.This provision must state 

a)For a specified period (no more than 90 days) starting at the beginning of the employees employment the employee is to serve a trial period

b)In this period the employer can dismiss the employee

c)If dismissed the employee cannot bring a personal grievance or other legal proceedings

4.Before the employee starts the employer MUST make sure the employee…

a)Receives a copy of the employment agreement including the written trial period clause 

b)Is aware of this trial period in the agreement

c)Has the opportunity to take advice 

d)Has signed the employment agreement

5.An employer cannot treat an employee differently from employees without a trial period provision 

6.An employer must act at all times in GOOD FAITH 

WHAT IS GOOD FAITH??

 

  • Good faith is about fairness and equality; it has been referred to over and over in the Courts as an important obligation that remains upon employers. It is crucial that the bargaining process is fair; an employer needs to give actual opportunity for the employee to go away and get advice. If there is pressure to sign a contract immediately this opportunity has not been given.  
  • Do not rush the process; if you are an employer, allow potential employees time to mull over the contract and seek advice. If you are the potential employee take this opportunity!

 

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Postal Address:
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Marion Square, Wellington 6141

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E: reception@buckettlaw.co.nz

 

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