90 Day Trial Periods – The Details are Important

Our 90-day trial periods are undergoing a radical transformation in light of the new government. Previously, only businesses with less than 20 employees were eligible to use the trial period; today, all businesses can use the 90-day trial period. With the new inclusion of all businesses, comes a steep learning curve in terms of not only incorporating it into your business correctly, but utilising it in a fair and reasonable manner. Despite being a straightforward process in terms of its application, a trial period needs to meet a number of requirements before it is deemed as legally valid.

Key Information

As employers, the most important aspect of the trial period that you need to keep in mind is ensuring that you first have a valid trial period to begin with. There are some key elements to look out for that can determine whether your trial period is valid or not. This includes:

• Ensuring that the employee under the trial period has not previously been employed by you in the past [in any capacity];
• That you expressed in an offer of an employment letter and written in the employee’s employment agreement that they were being subject to a 90-day trial period at the beginning of their employment tenure; and
• That the trial period provision in their employment agreement includes the following: a specified period (not exceeding 90 days) to commence at the beginning of their employment;
• A statement that the employer can dismiss the employee during this period; and
• If the employee is terminated during this period, that they cannot raise a personal grievance for unjustified dismissal against the employer;
• That the employment agreement was signed by both parties and the relevant commencement dates were in line with when the employee actually started work;
• No practical interview took place before the employee started work [unless the employee signed a practical evaluation form prior to the practical interview]

Employment Agreements

In addition to the above, the employer is required to provide a written copy of the employment agreement to the employee and provide written disclosure that the employee has had at least 3-5 business days to consider the terms of the employment agreement and seek independent advice with regards to it.

The most common pitfall for employers is when they request that a potential candidate completes a practical interview. This usually is an employer approach to determining whether a candidate has the appropriate skillsets to be successful in a specific role they are being considered for.

The most common pitfall for employers is when they request that a potential candidate completes a practical interview. This usually is an employer approach to determining whether a candidate has the appropriate skillsets to be successful in a specific role they are being considered for. This can be risky, as allowing a candidate to participate in such an exercise can result in them being deemed an employee. To avoid this issue, we recommend that an evaluation period form is completed by any potential candidates prior to completing any practical interview/assessment (the Restaurant Association has a template that you can use for this purpose). In addition to this, these candidates should under no circumstances be paid for this time. This can potentially deem them as an employee prior to you providing them with an employment agreement, therefore invalidating your trial period. We also recommend that you limit this evaluation period to a maximum of 2 hours.

New Zealand employment law regulations also require the employer to inform the employee (prior to employment) that they are on a trial period. The simplest approach to indicate this in an explicit form is not only through the employment agreement itself, but also expressed in a letter of offer. This will demonstrate that you as an employer have disclosed the trial period to the employee so they are expressly made aware of it.

Finally, an employment agreement must meet basic conditions for a trial period to be enforceable. Employers must include the 90-day trial period and a clause stating that they may dismiss an employee without cause and that the employee is not entitled to a personal grievance or other legal proceedings.

Without a proper trial period, an employer should not proceed with enforcing a dismissal under a trial period clause. Doing so may result in the employee filing a personal grievance claim for unfair/unjustified dismissal. To reduce the likelihood of personal grievance claims, we always recommend that the employer invite the employee to a formal meeting before terminating them. Concerns you have as an employer about why you are considering terminating the employee during the 90-day trial period should be brought up at this formal meeting. Keeping in mind that if you eventually dismiss the employee under the trial period you do not have to disclose reasons as to why or how you reached that decision to do so. The key here is however that you were fair and allowed the employee the opportunity to perhaps improve themselves prior to you making the decision to dismiss.

Personal Grievance Claims

It is critical for all employers to recognise that, while you may have legislative protection against a personal grievance claim for unjustified dismissal under trial period laws, you are not protected from personal grievance claims in any other area of law. Personal grievance claims for unjustified disadvantage, for example, remain open to employees even after they have been terminated within a valid trial period.

To offset this, employers are encouraged to act in a fair and reasonable manner prior to dismissing an employee under a trial period. They can do this by taking the extra step of identifying any issues in relation to the employees conduct or performance in the workplace in an initial meeting prior to dismissing. This gives the employee a fair and reasonable opportunity to address concerns you raise with them as the employer. Doing this mitigates the odds of an employee having a successful personal grievance claim made against you post-dismissal.

Remember that if you find yourself working with an invalid trial period, it does not mean you have no other options for managing the person in question. Employment law permits employers to use a variety of mechanisms to address any employment-related issues. However, if you find yourself in this circumstance, it may be wise to rethink your recruitment process so that you can incorporate the trial period going ahead. Trial periods are a powerful tool for the employer when utilised correctly. Failure to do so however, can result in the opposite effect. Essentially, if an employer is diligent during their recruitment process and adheres to all obligations stipulated in the legislation, then they have the option of utilising the trial period in their business. Employers with a Restaurant Association of New Zealand membership are highly recommended to contact the helpline team (on 0800 737 827) if in any doubt or confusion as to how to apply this.