Johnston Lawrence

Employment Law - 90 day trial period

24 March 2009. by Tim Blake , tagged with Business Law | Employment Law

As of 1 March 2009, the Employment Relations Act 2000 has been amended to specifically provide for 90 day trial period employment (the relevant section is the new s.67A).  It is designed for the situation where an employer may be reluctant to take a leap of faith in deciding whether or not someone might be suitable for the position.  If things don’t work out, the employer can bring the employment to an end for that reason.  Most OECD countries have similar trial period protections for employers.  Trial periods were permissible under the Employment Relations Act before s.67A was introduced (s.67). However, the previous regime did not provide employers with the same level of protection. Employers had been particularly vulnerable to personal grievances claiming that the termination had been procedurally unfair.  On the 24th February 2009 the Minister of Labour, Kate Wilkinson had stated that the new trial period protection “ … will encourage small businesses to give a prospective employee a go without fear of costly and protracted legal proceedings if the relationship doesn’t work out …”.  However, the s.67A regime also contains important limitations that employers should be conscious of.

In particular:

• The 90 day trial period rights given to employers only apply when there is an employment agreement signed by the parties that makes specific provision for this trial period.  The provision must specify the length of the trial period.
• The trial period cannot run for more than 90 days and it can’t be rolled over.
• If the employment does not work out, and if the employer wants the protection of this provision, the employer must give the employee notice of termination within the specified period (e.g. 90 days).
• Trial periods are not permitted for an employee who has previously been employed by that employer.
•  The trial period protection is only for small employers.  Employer is given a special definition for the purpose of s.67A and limited to someone that employs fewer than 20 employees.  Employers with fluctuating employee numbers might need to be conscious of this.  Some companies might set up subsidiaries, so that they have a separate legal entity operating a particular branch or operation, with that legal entity employing less than 20 employees.

Employers should also be conscious that s.67A only protects them in respect of a dismissal.  This does not mean that employers can behave however they want in that 90 day period.  The employee will not be able to bring a personal grievance claim for the dismissal.  However, if an employee was otherwise improperly treated, then they might have an action for that improper treatment.  Various forms of harassment are obvious examples of where an employee might bring a personal grievance notwithstanding the protection provided to an employer under s.67A.  Employers are also required to deal with employees in good faith.  Therefore, employers should not assume they are bullet proof when terminating during a s.67A trial period, especially if there have been other problems with the employer/employee relationship.

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