90-Day Trial Periods

Employers can offer employment on a trial period of up to 90 days. During this trial period if an employee is dismissed, that employee cannot bring a personal grievance in respect of the dismissal.

It is important that employers fully understand their obligations, to ensure that any trial period is effective.

The Employment Court clarified the interpretation and application of a 90-day trial provision in Smith v Stokes Valley Pharmacy (2009) Limited [2010] NZEmpC.

In this case, Ms Smith who had been an employee at a pharmacy for approximately two years, was offered employment with the new owner of the business when it was sold in 2009. She was given a draft employment agreement to consider before commencing employment. The agreement contained a 90-day trial period and Ms Smith queried this with the employer upon receipt of the draft agreement, but was told such provision was standard in all employment agreements offered by the employer. Ms Smith began working for the new employer on 1 October 2009 and signed her employment agreement on 2 October 2009. The employer was dissatisfied with Ms Smith’s performance and dismissed her under the provisions of the 90-day trial. Ms Smith brought proceedings for unjustifiable dismissal.

The Employment Court found that the trial period in the agreement was not valid and could not be relied upon because the employment agreement had not been signed before Ms Smith commenced employment. Trial periods can only be used where the employee has not previously been employed by the employer or is not currently an employee of the employer. Because Ms Smith’s employment commenced on 1 October 2009, she was considered to be an “employee” at the time she signed the employment agreement on 2 October 2009. On this basis, she was entitled to bring a personal grievance for unjustified dismissal.

In some cases, the employment relationship may start before the employee actually commences work. An “employee” as defined in section 6 of the Employment Relations Act 2000, includes “a person intending to work”. It is therefore essential that, if an offer of employment is made and accepted before the employment agreement is signed, the parties are clear about whether a trial period is to be included in the employment agreement.

The key points to note when utilising a trial period in an employment relationship are:

• Ensure that the employment agreement containing the trial period of up to 90 days is signed before the employment relationship commences.
• An employer cannot utilise the provisions of a trial period if the employer has previously employed the same employee.
• The employer must ensure that the employee has an opportunity to consider the employment agreement before signing and that the employee is aware of their right to seek independent legal advice.
• A trial period does not prevent an employee from raising a grievance on other grounds such as discrimination or harassment.
• If an offer of employment is made and accepted before employment starts, the parties must incorporate in the offer of employment that a trial period will be utilised.

If there is any doubt as to whether a trial period can be used for dismissal, please seek legal advice.