90-day Trial Period Clauses - Safety Warning

Why?

An effective 90-day trial period clause permits an employer to terminate an employee in the first 90 days of their employment without threat of a personal grievance (PG) for unjustified dismissal.

While the clause prevents a PG for unjustified dismissal, it does not prevent a claim for unjustified disadvantage. As a result, care should be taken to ensure that there is no ground for a PG.

Previously only smaller businesses with less than 20 employees could use 90-day trial period clauses. Now larger businesses can also use these clauses. As a result, there has been a notable rise in employer queries regarding how best to implement, monitor and rely on them.

Implement – Form

A 90-day trial period clause can only be relied upon where the employee has not been employed by the business before. This includes employees who have been engaged on a casual basis.

It is recommended that any potential employee be notified of the existence of a 90-day trial period clause in the proposed individual employment agreement in the offer of employment letter.

The clause is required to meet the requirements of section 67A of the Employment Relations Act 2000 (the Act). This states the clause must state that –

1. The trial period is for a specified period (not exceeding 90 days), starting at the beginning of the employee’s employment.
2. During that period, the employer may dismiss the employee.
3. If the employer does so, the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.

Finally, it is well established in case law that an employment agreement containing the trial period clause must be signed prior to the employee commencing work if it is to be relied on.

Monitor – How to use?

We urge our employer clients to thoroughly induct their employees, so that they start their role with a clear understanding of what they are expected to do in their role. Best practice is to ensure they are aware that they are subject to a trial clause.

Schedule regular meetings- at least on days 30 and 60 of employment, to ensure that the employee is aware of what is going well => and not.

Give notice of your intent to rely on the clause. It should not come out of the blue. Meet and understand the employee’s perspective.

Be aware that s67B (4) and (5) of the Act states that an employee whose employment agreement contains a trial provision is, in all other respects (including access to mediation services), to be treated no differently from an employee whose employment agreement contains no trial provision or contains a trial provision that has ceased to have effect subject to:

1. in observing the obligation of dealing in good faith with the employee, the employer is not required to comply with section 4(1A)(c) of the Act which relates to providing information that you are seeking to rely on to the employee to consider and comment on; and
2. the employer is not required to comply with a request under section 120 of the Act which is providing a statement for dismissal to the employee when requested.

Rely – Terminate?

If the decision is made to terminate an employee, they must be given notice to terminate within the initial 90 days. Day one (1) of the 90-day trial period is the commencement date – and it is best if this is clearly set out in the employee IEA.

For further guidance on how to include a 90-day trial clause or a probationary clause where a 90-day trial clause is not appropriate, reach out to our employment team at Harkness Henry led by Alexandria Till.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.