Published: Mon, Jun 1st, 2009
90 DAY TRIAL PERIOD INTRODUCED
The "90 day trial period" has received plenty of press coverage since it was initially proposed by way of an amendment to the Employment Relations Act. The amendment allows employers who have fewer than 20 employees to terminate the employment of new staff within the first 90 days of employment without fear of a personal grievance for unjustified dismissal; provided the parties have agreed to such a trial period in the employment agreement.
The amendments came into force on 1 March 2009. The date of determining whether the employer has fewer than 20 employees is the date the employment agreement was entered into. The legislation does not specify who is counted as an employee and so, potentially, casual and part-time employees could be counted. The following conditions apply to the trial period.
• It will only apply to employees who have not previously been employed by the employer.
• Both parties must agree to the trial period
• The trial provision must be a written provision in the employment agreement
• The trial period must not exceed 90 days - so it could be for a shorter period than 90 days
• During the trial period the employer may dismiss the employee by giving notice of termination
• The employer must give notice of termination to the employee within the trial period in order to be protected by the trial provision
• If the employee is dismissed they are not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal
• Employees will still be able to bring personal grievance claims for unjustified disadvantage, sexual or racial harassment, discrimination or duress.
In all other respects the employee is to be treated no differently from other employees whose employment agreements do not contain a trial period. The obligation of good faith remains during the trial period with the exception that the employer is not required to consult and to provide information to the employee prior to termination.
Commentators have mixed views on the amendments. Australia and most other OECD countries allow trial periods.
The New Zealand Government has introduced this legislation in an effort to encourage employers to provide employment opportunities to people without financial risk to the employer if the employment relationship does not work out.
In an announcement on 11 December 2008 the Minister of Labour, Hon. Kate Wilkinson, stated that "By lowering the legal risks employers face, they will be more confident in giving people the opportunity to prove themselves" and that "The 90 day trial will provide real opportunities for people at the margins of the labour market".
Given that the trial period must be agreed between employer and employee, those employees who are in demand and have some bargaining power will no doubt attempt to negotiate the removal of the trial period.
Employment problems can take some time to surface so employers will need to be vigilant to ensure they act within the 90 day period.
Restructuring and Redundancy
The current economic climate has led to a number of businesses considering restructuring and this in turn leads to the prospect of redundancy. The legal obligations of an employer to ensure that a redundancy is performed both in a substantively justified manner and in accordance with the required procedure is significant. Even where the legitimacy of the redundancy is not in question a failure to comply with the procedural requirements could render the redundancy unlawful and result in a significant claim by an employee.
In particular employers should consider the following issues:
a) The reasons for the redundancy and the evidence that is available to support it;
b) The selection criteria involved in identifying the employee(s) to be made redundant;
c) The level of redundancy compensation payable;
d) The length of any notice period;
e) The employer's obligation to consult with the employee throughout the process;
f) The support to be given to the employee as part of the redundancy process and through the notice period.
It is our very strong recommendation that in any circumstances where a redundancy is being considered expert legal advice should be sought. Please contact Helen Wendelborn or Michael Robinson of this office should you require assistance in this regard.
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We strongly suggest that you take time to review your business practices. We would be very happy to offer assistance to any clients who may require further advice in order to comply with these new legal requirements.