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Trial Periods - time for a review?

07 September 2016

A recent case in the Employment Relations Authority (ERA) has again highlighted the importance of making sure employment agreements contain the legislative requirements for 90 day trial periods to be effective.

The case of Du Plooy v Lighthouse ECE Limited [2016] NZERA Auckland 282 addressed the question of whether the 90 day trial period in the employee’s agreement was effective.

The material issue before the ERA was whether the trial period clause “states or is to the effect” that the trial period starts at the beginning of the employee’s employment.  This is a requirement of section 67A(2)(a) of the Employment Relations Act 2000 (Act) – the legislation that provides the framework for trial periods.

The employer argued that because the clause stated that the trial period will apply under s.67A of the Act, and the employment agreement stated at page 17 that “the commencement of employment is: 22 November 2015”, it was clear that the parties intended that the trial period would begin at the commencement of employment.

The employer’s position was rejected and the trial period provision was found to be ineffective.  The ERA found instead, that the trial period clause did not make any mention of, or reference to, the commencement date, nor did it reasonably imply that the trial period started on the employee’s first day of work.

The ERA went on to note that there are a number of circumstances in which parties may agree that the 90 day trial period does not start on the commencement date of employment but rather, when the employee actually starts the work she was employed to do.  For example, where an employee is undertaking a lengthy induction, overseas temporary placement, offsite training or secondment, the employee will not have actually started the tasks they were employed to do.

This case is a timely reminder of the importance of having clear and effective terms in employment agreements, particularly in relation to clauses that create obligations or extinguish rights (such as denying an employee from being able to raise a personal grievance for unjustified dismissal).

Trial periods - things to keep in mind:

  1.     The agreement and trial period provisions must be in writing.
  2.     The employee must sign the agreement prior to commencing employment
  3.     A trial period is not effective where the employee has previously been employed by the employer.
  4.     The trial period clause must contain the following information.
    •  The length of the trial period (not to exceed 90 calendar days).
    •  The trial period commences at the beginning of the employee’s employment.
    •  During the trial period, the employer may terminate employment.
    •  If the notice period under the trial period clause is different to the termination provisions in the employment agreement, this must be specified.
    •  The employee is not entitled to raise a personal grievance or other legal proceedings in respect of a dismissal under the trial period provisions.
  5.     A termination under a 90 day trial clause must be notified before the 90 day period ends.
  6.     Termination must be communicated clearly (preferably in writing).
  7.     The employee must be provided with the opportunity to work out the relevant notice period, or offered payment in lieu of working the notice period.
  8.     The notice period can extend beyond the 90 day period so long as effective notice has been given of the termination.
  9.    The employee cannot raise a personal grievance in respect of the dismissal, however, the employee is not precluded from raising a grievance for any other matters (for example, sexual harassment, unjustified disadvantage issues or non-payment of wages).

If you have any concerns about employment issues or agreements, we recommend that you promptly seek advice.

 

Erin Anderson is a Senior Solicitor in the Employment team at Norris Ward McKinnon. Contact Erin at erin.anderson@nwm.co.nz

Erin Anderson

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