Employers Beware – Changes to the 90 day trial period and how they may affect you!

The old

90 day trials were introduced for small businesses in 2008 and extended to all employers in 2010. The provision allows employers to ‘trial’ new employees for up to 90 days. The 90 day trial period permits employers to dismiss new staff within the first 90 days of their employment without the employer having to provide any reason to the employee and without the employer facing any legal action for unfair dismissal. In other words, the employee is not allowed to bring a personal grievance for unfair dismissal. Put simply, an employee was essentially not permitted to bring a personal grievance for unfair dismissal within the first 90 days if a valid 90 trial period was in place.

Where a 90 day trial period applies, and as the trial only applies to “new employees”, it has been imperative that employees sign their employment agreements containing the trial provision prior to commencing work with the employer. The Employment Relations Act 2000 is silent on the definition of a “new employee”. However, an employer may not be able to rely on the 90 day trial period where the employee has previously been employed on a casual agreement, or the employer has run a paid induction course for the employee before the employee has signed the employment agreement. It is this scenario which has caused problems for employers.

In all cases, an employer who proposes a 90-day trial period must have provided the employee with a copy of the written employment agreement containing that provision prior to the employee commencing work. In addition, the employee must have been given a reasonable opportunity to review the agreement and receive advice on it.

The new

The impending end of 90 day trial period was announced by Prime Minister Jacinda Ardern as the first part of a legislative overhaul of the New Zealand employment legislation. The Employment Relations Amendment Act 2018 is presently before the Select Committee and is aniticpated to come into force early in 2019. If the Amendment Act is adopted in the proposed form, the opportunity to incorporate 90 day trial period provisions in employment relations agreements will be restricted to companies with 19 or fewer employees.

What does it mean to employers?

Employers with more than 20 employees, who rely on the 90 day trial period in their employment agreements must now revisit their employment agreements as they can no longer rely on the 90 day trial period. Thus, employers must ensure they are familiar with due process in order to avoid any personal grievance brought by an employee.

Employers who are not able to use the trial period provision are able to include comprehensive probationary period provisions in their employment agreements. Probationary periods are subject to far more restricted controls and place far greater obligations on employers than does a 90 day trial period. Employees employed with a probationary period in their employment agreement can still be dismissed at the end of the probationary period, however employers must follow a fair process and have a fair reason for dismissal which is required to be communicated to the employee. The probationary period provides greater protection to the employee than the 90 day trial period does.

Employers will need to ensure that they are aware of exactly how many employees they employ so as not to exceed the 20 employee threshold without removing the 90 day trial period clause from their agreements. If the employer does exceed the 20 employee threshold and the 90 day trial period remains in the agreements, the employer will not be able to rely on the trial period.

Any 90 day trial periods contained in employment agreements for businesses with more than 20 employees remain enforceable until the Bill comes into force.

The employment law environment is evolving fast. We recommend that employers regularly review their employment relations agreements in order to ensure that they fully comply with the current legislation and labour law environment. Michael Robinson, Partner; Catherine Pendleton, Associate and the rest of the Employment Team are always happy to assist clients in this regard or in relation to any issue involving Employment Law matters.