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90 Day Trial Periods - Process must be Perfect

01 September 2015

Times are tough. You may be considering reducing your staff numbers by using the 90-day trial period to terminate their employment.  However, you need to exercise real caution when dismissing an employee by using the trial period. In order to use this successfully it is essential that you follow the correct process.

Issues to be aware of

Firstly, there are various things that need to be included in the trial period clause in your Employment Agreement.  These are set out in the Employment Relations Act.  Principally, the trial provision should be written and specify the period that the trial period will be for (it must not exceed 90 days).  The trial period must start at the beginning of the employee’s employment. The clause should also specify that during the trial 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.

Secondly, the sequencing must be perfect.  It is paramount that the employee is provided with the Employment Agreement and reasonable opportunity to obtain independent advice and that the Agreement is signed before the employee starts work.  All of these issues have been tested and courts have consistently applied a strict approach to them.

Thirdly, trial periods are for new employees only.  A staff member who has previously worked for you cannot be dismissed under a trial period.  Beware of using ‘pre-employment trials’ before making a firm offer of employment.  There is a real risk that the person will be an employee in the eyes of the law.  Advice may be necessary if you intend to use this approach.

Fourthly, it is paramount that employee receives notice of termination before the expiration of 90 days.  The notice should be written.

Fifthly, employers must ensure they observe other terms of the agreement during employment.  For instance, if training needs to be provided during the course of the trial period, an employer must provide this.

It is also important to be aware that an employee whose employment was subject to a trial period provision may still bring a personal grievance for unjustified disadvantage or a claim for harassment or discrimination.  Employers need to ensure they abide by all of the statutory obligations of good faith during a trial period.

Using the 90-day trial period is not an opportunity to ‘fire at will’. The courts have been very clear that the requirements of the legislation must be strictly complied with.  However, when the process is correctly followed, using the 90-day trial period can be an effective tool to dismiss an employee. We recommend that employers and employees seek legal advice when the trial period is to be used.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.