Ahh, yes. 90 day trial periods.

A contractual cure-all. A way for small employers to hire without fear, and terminate employment without the fear of personal grievances for unjustified dismissal.

It all sounds so simple. If only the reality lived up to the dream!

The change to the Employment Relations Act to bring in the 90-day trial period was eight years ago and was originally brought in for use by those employers who had less than 20 employees. It was supposed to be an enticement for small employers, to encourage them to increase their employee pool and to try out new employees without fear of convoluted processes to terminate (without risk) if it didn’t work out.

It was supposed to be an opportunity to lessen the human resource burden in those organisations who just wanted to get on with doing the business.

2009 saw the landmark Smith v Stokes Valley Pharmacy case heard by the Employment Court. While not great for Stokes Valley Pharmacy, it helped to define what other employers needed to be doing to ensure that the 90-day trial provisions contained within their agreements were valid.

Chief Judge GL Colgan found that Ms Smith was able to bring her claim of unjustified dismissal and unjustified disadvantage and that Stokes Valley Pharmacy had breached their s 4 (“good faith”) obligations of the Employment Relations Act 2000. His overarching message was that if employers have not strictly complied with the provisions of the Act (s 67A and 67B) they will be exposed to claims for unjustified dismissal and unjustified disadvantage and that in most cases, they will lose.

The Chief Judge was also clear about what obligations an employer needed to meet in order to have the protections of the 90-day trial period available to them and stated that the employer needed to ensure the employment agreement stated or included the following:

1. The trial period must be in the written employment agreement;

2. That the employee is to serve a trial period;

3. The duration of the trial period (and to ensure that it doesn’t exceed 90 days);

4. That the trial period is to commence at the beginning of an employee’s employment;

5. That the employer may dismiss during the specified period;

6. That the employee is not entitled to bring a claim for unjustified dismissal in respect of the dismissal (but may bring a claim for unjustified disadvantage);

7. That the employee must not have previously worked for the employer; and

8. That the notice of the termination is given in compliance with the notice specified in the agreement.

All in all, pretty scary stuff for small employers!

As you can imagine the interweb was flooded with 90-day trial provision clauses being flogged by consultants (for a small fee) for employers to include in their employment agreements!

For a short time, all was going well.

Then in 2010, the legislation was amended to enable all employers to access the “benefits” of the 90-day trial provision.

In 2011, the Employment Court heard Blackmore v Honick Properties Limited and confirmed in the decision that the statutory provisions in relation to the 90-day trial period in employment agreements must be strictly applied.

Now this shouldn’t have been news to employers.

But the decision was useful for employers because it was definitive information for those employers wishing to avail themselves of 90-day trial periods in their employment agreements.

The decision stated that they (employers) must ensure the following things:

– That the trial periods must be mutually agreed in writing, before a potential employee becomes an employee;

– That the trial provisions must be provided to potential employees at the same time they receive the other terms and conditions of employment;

– That the potential employee is given reasonable opportunity to seek advice in relation to the terms of the offer of employment (including the 90-day trial provision);

– That the terms of the offer of employment are accepted (usually by signing the agreement).

There is one last point where the law has been tested in the Employment Relations Authority and this relates specifically to the commencement date of the trial period. Many agreements assume that this coincides with the commencement date of employment, however, if this is not specified and a date is not identified in relation to the commencement of employment, this may render the 90-day trial period invalid.

I would suggest however, (based on the number of cases I see coming across my desk), that despite the trial period having been in place for many years, employers may still not have their heads completely around this trial period thing!

I think outside of the statutory interpretation issues, there are some other things that employers should still be considering when dealing with employees who are within the first 90 days of employment.

Employers need to treat employees as if there was no 90-day trial provision in the agreement.

This means that employers must deal with their employees in good faith. What the heck does that mean?

It means that if there is training required to do the job, then this training needs to be provided.

If the employee isn’t meeting the standard of performance required, employers need to demonstrate that they have taken reasonable steps to help their employees meet the standard either via additional training or coaching.

The employer must be communicative and provide feedback, and if the employer makes a decision to terminate employment, that this shouldn’t come as a surprise to the employee (because there have been discussions around the potential termination ahead of the actual deed).

I think the key is respect and treating your employees as you’d want to be treated if you were in the same situation. Taking on a new employee can be daunting (and it’s just as scary for your new employee!) but if your intent is to do the right things – then you’re already halfway there.

For the other half of the journey (process and paperwork) – let me help you with that!

Emma Moss – putting the human back into human resources.

Emma Moss, Employment Advocate, Work Law Ltd

Emma Moss is a WorkLaw Advocate who has spent the last decade working in senior human resource roles.
She is currently undertaking a law degree through the Auckland University of Technology (AUT).