Trial Periods – Not as simple as they appear
General / 25 December 2016
Since 1 April 2011, all employers, regardless of the number of staff they have, have been able to employ a new employee on a 90 day trial period.
WHAT IS A 90 DAY TRIAL PERIOD?
Under a 90 day trial period, a new employee can be dismissed within the first 90 days of employment and cannot raise a personal grievance for unjustified dismissal. However, they can still raise a personal grievance on other grounds such as discrimination, harassment or unjustified disadvantage if it’s not related to the dismissal itself.
The law for trial periods is set out in ss 67A and B of the Employment Relations Act 2000. Case law has shown that the Courts strictly interpret trial periods and therefore employers can only rely on the trial period to dismiss an employee if they adhere to all of the requirements.
WHAT ARE THE REQUIREMENTS?
What does the trial period need to state?
If you want to be able to rely on the trial period the clause needs to clearly state:
– That the employer may dismiss the employee in the first 90 days of employment; and
– There is no entitlement to bring a personal grievance for unjustified dismissal.
Before the commencement of employment
A trial period will only be valid if the person is a new employee. That means they cannot have done work for this employer in the past. A person that starts work, even just for five minutes, will not be considered a new employee. Make sure you double check this – it is especially relevant where you are purchasing a business with existing employees when timeframes are often tight and getting staff to sign contracts a low priority.
The Court has held that the trial period clause must be:
– Included in the employee’s written employment agreement; and
– Signed by the employee prior to their first day of work (even an hour after starting has been held to be too late!).
Employee’s have a right to know that their employment is subject to a trial period. We recommend that you inform the employee when you are making a job offer that their employment agreement contains a trial period. It is also a good idea to include a sentence in your offer of employment letter that states that the agreement includes a trial period.
When offering an employment agreement, make sure you advise the employee that they have the right to seek independent legal advice and give them an opportunity to seek such advice prior to signing the agreement.
DISMISSING UNDER A TRIAL PERIOD
If you are concerned about an employee’s performance, and their employment is subject to a trial period, we recommend that you first check that you have adhered to the above requirements. Secondly, raise your concerns with the employee and explore how you can assist them with training, mentoring and/or additional support to help them improve their performance within the trial period. Regularly meeting and mentoring staff about what is required of them will go a long way to meeting your obligations of good faith that still apply even if an employee is under a trial period.
If you still see no improvement in the employee’s performance, and are considering dismissing them on the basis of the trial period, at the very least write to them setting out your concerns and invite them to a meeting setting out that you are considering terminating their employment under the trial period. Ensure that you inform them of their right to have a representative present. At the meeting, outline your concerns again and ask them for their explanations and comments in regard to the possible dismissal. Ensure you take time to consider the employee’s explanations and feedback. After this considering, we recommend that you meet again to deliver the decision and confirm this when you write to them with the final decision.
There may of course be reasons other than underperformance that may cause you to want to dismiss an employee under a trial period such as incompatibility. But if an employee has behaved in a way that amounts to serious misconduct, you really should be going through a full disciplinary process rather than relying on a trial period to dismiss.
Although you don’t have to give a reason for dismissing unless you are asked, it is good to be able to point to something if you are. This is because you are still required to be proactive in your communication with the employee, including telling the employee why you are dismissing them if they ask, even if those reasons wouldn’t usually be a justifiable reason for dismissing them without the trial period.
It is essential if you are to be able to rely on the protections of the trial period provision, to make it clear that you are dismissing the employee on the basis of the trial period, adhering to any notice period in the employment agreement, and any other obligations you may have. However don’t forget that you just because an employee is on a trial period, you can’t treat them any differently to any other employee except to the extent allowed by law.
Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. We recommend that you obtain legal advice specific to your situation before proceeding and would be happy to help in this regard.