A switch in Government from left to right invariably results in a return of 90-day trial periods for all businesses. This is expected to take effect before Christmas.
What is a 90-day trial period?
A trial period is a period of 90 days (or less) commencing at the beginning of a new employee’s employment, in which the employer may dismiss the employee without giving reasons, and the employee is not entitled to bring a personal grievance or any other legal proceedings in respect of the dismissal.[1] It is worth noting that other personal grievances – such as discrimination, harassment and unjustified disadvantage – can still be brought by an employee during a 90-day trial period[2].
What needs to be in an employment contract for a 90-day trial period to be valid?
When using a 90-day trial period, it is important to get it right from the start. For a trial period clause to be valid, it is vital that the employee is presented with and signs the employment agreement before their first shift. This is because a 90-day trial period cannot be used against an ‘existing employee’, and the Employment Relations Authority has recently found that a new employee who ‘shadowed’ other employees for two days before being given their formal employment agreement (containing a trial period clause) was an ‘existing employee’[3]. It is also important to draw the employee’s attention to the existence of the clause and let them know they can seek independent advice.
The clause must state that the employee will be on trial for a set period (this can be less than 90 days, but the exact length must be specified), that the employer can dismiss the employee during the trial period, and that the employee will not be able to bring a personal grievance or other legal proceedings about their dismissal.
How is an employee dismissed during a 90-day trial period?
If the trial provision is properly included, the employee cannot bring an unjustifiable dismissal claim if they are dismissed within the trial period. However, there are still some important considerations to be made when dismissing an employee during their trial period.
First, it is important that the employee is given notice of their dismissal within the 90-day period – otherwise, normal termination procedures apply.
Second, it is important to note that the 90-day trial period does not prevent an employee bringing a claim for breach of obligations of good faith – so while you are not required to give reasons for the employee’s dismissal, good faith obligations still apply (albeit minus the obligation to provide relevant information for consultation prior to dismissal). While an employee is on a 90-day trial, it is important to act in a good faith manner throughout by raising any concerns with the employee and providing assistance to help them improve.
If the employee does not improve within the 90 days, and the employer wishes to dismiss them, there is a process to follow even though the employer does not have to give reasons for the dismissal. It is still good practice to give reasons if possible, even if those reasons are very brief. The employee should be invited to a meeting to discuss the termination of their employment under the 90-day trial period, given the reasons why the employer intends to dismiss them, and letting them know they can bring a support person along to the meeting. The employee’s dismissal should be confirmed in writing, before commencing with the notice period set out in the employment agreement.
Special thanks to Summer Clerk Lydia Munro for her assistance in writing this article.
[1] s 67A Employment Relations Act 2000
[2] s 67B (3) Employment Relations Act 2000
[3] Tepania v Haven Falls Funeral Home Limited [2023] NZERA 587
