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90 Day Trial Periods Will Be Available To All Employers

Published 01 Dec 2010

The Employment Relations Amendment Act 2010 has now been passed by Parliament, and from the 1st April 2011 the 90 Day Trial Period provisions will be available to every employer (and not just those employers employing fewer than 20).

Whilst this measure is very welcome, it does mean that there will be wider use of the 90 Day Trial period clauses, and inevitably, more employers who get the rules wrong. The Employment Court in the recent Smith -v- Stokes Valley Pharmacy has indicated that the courts will interpret the employer's obligations strictly in deciding whether the employer has complied with the law.

If the employer gets it wrong, and the 90 Day trial period clause is not effective, the dismissal will be unjustified, and the employer could be ordered to pay substantial compensation.

90 Day Trial Periods can only be used:
  • After 1st April 2011 the 90 Day Trial Period is available to every employer. Before 1st April 2011 the 90 Day Trial Period is only available if the employer employs fewer than 20 employees on the day that the employee is signing this agreement. The '20' includes each part time employee or casual employee as 1.
  • If the employee has not worked for the employer previously.
  • If the trial provision is contained in a written employment agreement.
  • If the trial period provision contains the required terms that
    • The trial is for a specified period (not exceeding 90 calendar days) starting at the beginning of the employee's employment (when the employee signs the agreement) and stating that the employee is to serve a trial period
    • During that period the employer may dismiss the employee; and
    • If the employer does so the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal
The employee MUST sign the employment agreement (containing the trial period clause) before starting work.

You must not treat the employee differently because he/she is on a trial period clause. If you would normally consider issuing a warning, you should not dismiss the employee on a trial period instead.

Your obligations of 'good faith' apply throughout the working relationship. So you still have an obligation to communicate any concerns that you have (to give the employee a chance to improve).

You must comply with your contractual obligations – if you have promised training and reviews in your employment agreement, you must provide training and reviews.

If you decide to terminate the employee during the 90 day trial period:-
  • You need to provide notice of termination in accordance with your employment agreement. (you can pay in lieu of requiring the employee to work through the notice if your contract provides for this).
  • You are required to provide the reason why you have decided to terminate to the employee at the time of termination, if the employee asks. There is some debate about whether you may be required to give the employee a reason - even if you are not asked why. If your reason is non - discriminatory, and you have treated the employee fairly (in comparison with other employees not on a trial period) it would be good practice to inform the employee of the reason. If you have difficulties with your 'reason' - take advice, before terminating.