Love ‘em or loathe ‘em, the Government recently confirmed 90-day employment trials are here to stay, albeit now only for businesses with fewer than 20 employees – which accounts for the vast majority of ventures in our area.

While the provisions of the 90-day trial have ebbed and flowed over the years with the changing Governments, it remains a significant employment tool for businesses. 

Used ethically, lawfully, and underpinned by genuine good faith, a 90-day trial can serve its purpose extremely well, giving employers the opportunity to “road test” a new hire, check their suitability for the role, and, importantly, their fit within the company culture. Proponents say 90-day trials offer a “win-win”, giving employees the chance to score a job, a chance they mightn’t have otherwise been offered had an employer had to take them on untried, with the threat of a personal grievance if things didn’t work out. 

Used poorly, however, 90-day trials can be an absolute disaster – for both parties.

It concerns me some employers aren’t bringing themselves up to speed with the requirements around conducting a trial properly. Some owners and managers hear that a 90-day trial allows them to hire an employee and terminate their employment within that period without having to justify it, and assume it’s as simple as that. It’s not. A 90-day trial is not some loose, casual arrangement. It must still be properly documented, and the prescriptive rules followed. Fail to do so, and, as an employer, you can find yourself deep in legal hot water, and very much out of pocket.

The fundamentals

A 90-day trial is allowed under the Employment Relations Act 2000, but, remember, comes with strict provisos, including: 

• The employer must be a small-to-medium sized employer – meaning an employer who employs fewer than 20 employees at the time which the agreement is entered into.
• The provision must be stated in the agreement.
• It must be for a specified period of no more than 90 days, starting at the beginning of the employee’s employment.
• The agreement must be signed by the parties.

There are several other very important aspects of the trial period that are covered by the fundamentals of the employee relationship and that have been interpreted by the Courts, including:

• For the trial period to be valid, it must be agreed upon prior to the employee starting work.
• A previous employee who is re-employed cannot be subject to another trial period. 
• The trial period must be agreed in good faith.

Like most employment agreement terms, the trial period is negotiable. An employee doesn’t have to agree, or the parties may negotiate a shorter duration. 

Despite how critical it is to include the trial period’s terms in the agreement and ensure that it’s signed before the employee starts work, employers commonly overlook these vital steps … and walk right into personal grievance territory.  

Take this common scenario. If an employee receives an offer or an agreement on Friday, starts work on Monday and then signs the agreement on Wednesday, even if the trial period is in the agreement, it’s not valid. In this situation, the employment relationship has commenced, and the employer can only dismiss the employee, like any other worker, on the grounds of performance, redundancy or misconduct – and not without following a fair and reasonable process, ensuring, of course, that they are acting in good faith.

Trial time up?

In practice, what does a valid, mutually-agreed 90-day trial period actually provide for?

• The employer may terminate the employee’s employment during the trial period without giving a reason.
• The employee cannot raise a personal grievance against the employer for being unfairly dismissed.
• However, the employee is still entitled to the same other minimum rights as all other employees. 
• If the employer decides to terminate the employee during the trial period, they still must provide the notice agreed upon in the employment agreement. This applies even if it’s the last day of the trial. So, the employee must be allowed to work out the notice period or be paid out by the employer not to work.
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Other minimum entitlements

An employee on a trial period is still entitled to all other minimum requirements in relation to health and safety, minimum wages, holiday pay, annual, as well as other forms of, leave. 

Again, remember, the employee must also be treated in good faith, and in the same way as other employees who are not on trial periods. 

Other personal grievances

Even though an employee cannot raise a personal grievance for being dismissed under the 90-day trial, the employee remains entitled to lay a claim against, among other things, being treated unfairly, harassment, discrimination and unjustifiable disadvantage; starting working before an agreement is signed; and, the lack of a trial period in the agreement.

Notice

If an employer decides to dismiss the employee during the trial, they must provide notice, as stipulated in the employment agreement, before the agreed period is up. So, say if there’s a 90-day trial period and a two-week notice period, an employer may give notice to the employee on the 89th day, but the employee’s last day will not be for another two weeks (unless the employer opts to pay out the worker instead).

If the employer doesn’t give notice at the end of the trial, then the employee is no longer on a trial period and continues to be an employee. 

Some cases in point

It’s amazing what a difference a handful of minutes can make. A worker on a trial period was told by his prospective employer on December 23 that he had the job, was sent his employment agreement and told to show up at 8am on January 18. He duly arrived that day around 7:45am, was introduced to staff and then taken back to the office to sign the agreement. Records show that he then clocked into work at 8:02am. The Employment Relations Authority determined that the employer had complied with the Act and that the worker had a trial period. However, if the man had started working prior to signing the agreement, the outcome would likely have been very different.

Another situation involved a bakery worker. After a power cut, the employee was told to go home. When the power came back on the employer requested the employee return to work. The employee replied they were unable to return, to which the boss responded: “Bring your uniform back tomorrow; today is your last day, thanks”. The employer claimed to dismiss the baker under the 90-day trial clause. However, despite four weeks on the job, the baker still hadn’t actually signed an employment agreement. Therefore, the trial clause didn’t apply, and the employee was awarded $5000. 

In a nutshell …

The 90-day trial period is available only to small-to-medium sized businesses with fewer than 20 employees. If an employer intends to rely on the provision, it must be included in the employment agreement, and that agreement must be signed by both parties prior to the worker starting. 

While, the 90-day trial does allow employers the added comfort of knowing that, if the employee doesn’t live up to their glowing references, that they may dismissed, employers still need to act with care – both legally and morally.

In any event, every employment relationship is unique, and, if you’re planning to “swipe right” at any time, it pays to take legal advice first.

Feedback, comments and questions are always welcomed – please feel free to e-mail me on [email protected]

T: 03 443 0900

W: www.aspiringlaw.co.nz

John Mezger specialises in business, employment and immigration law at Aspiring Law.

Please remember, this information is designed as a general guide, and should not replace specific legal advice on a particular issue.