90 Day Employment Trial Periods

For help with employment matters contact Lois Flanagan (379 4383)

The Employment Relations Amendment Act 2008 introduced new provisions into New Zealand's Employment Relations Act 2000 allowing employers who have fewer than 20 employees to terminate the employment of new staff within the first 90 days of employment without fear of a personal grievance for unjustified dismissal: provided the parties have agreed to a trial period in the employment agreement.

Can I hire new employees on trial?

From 1 March 2009, employers who have fewer than 20 employees can terminate the employment of a new employee within the first 90 days of employment provided the employer and employee had agreed to a trial period in the employment agreement. The date of determining whether the employer has fewer than 20 employees is the date the employment agreement was entered into. The legislation does not specify who is counted as an employee and so, potentially, casual and part-time employees could be counted.

Are there any special rules that apply to the trial period?

The following conditions apply to the trial period:

It will only apply to employees who have not previously been employed by the employer.
Both parties must agree to the trial period.
The trial provision must be a written provision in the employment agreement.
The trial period must not exceed 90 days, but it could be for a shorter period than 90 days.
During the trial period the employer may dismiss the employee by giving notice of termination. The employer must give notice of termination to the employee within the trial period in order to be protected by the trial provision.
If the employee is dismissed within the trial period they are not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal. They can still bring personal grievance claims for other problems such as unjustified disadvantage, sexual or racial harassment, discrimination or duress.

In all other respects the employee is to be treated no differently from other employees whose employment agreements do not contain a trial period. The obligation of good faith remains during the trial period with the exception that the employer is not required to consult and provide information to the employee prior to termination.

Are trial periods a good idea?

Commentators have mixed views on allowing trial periods. Australia and most other OECD countries allow trial periods. The New Zealand Government has introduced this legislation in an effort to encourage employers to provide employment opportunities to people without financial risk to the employer if the employment relationship does not work out. The Minister of Labour has stated that the intention of the amendment is to make employers "more confident in giving people the opportunity to prove themselves," and that "The 90 day trial will provide real opportunities for people at the margins of the labour market."

Other points to consider.

Given that the trial period must be agreed between employer and employee, those employees who are in demand and have some bargaining power will no doubt attempt to negotiate the removal of the trial period. On another note, employment problems can take some time to surface so employers will need to be vigilant to ensure they act within the 90 day period.

Should you need any assistance with this, or with any other Employment matters, please contact Lois Flanagan at Parry Field Lawyers (379-4383).