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90-day Trial Periods Are Back

All employers are now able to use trial periods, regardless of how many employees they employ. 

Previously, only small-to-medium sized employers (those with 19 or fewer employees) could use a trial period.

What is a Trial Period?
A trial period is a provision in an employment agreement that allows the employer to dismiss an employee, without cause or without following a procedurally fair process, within the first 90-days of their employment.

What requirements must be met for a trial period to be enforceable?
There are a number of requirements an employer must meet to be able to rely on a trial period to validly dismiss an employee. These include:

  • the trial period must be in writing, and must specify the period (not exceeding 90-days), that during this period, the employer may dismiss the employee and if the employer dismisses the employee, the employee is not entitled to bring a personal grievance or other legal proceedings in respect of their dismissal
  • the employment agreement must not contain a probationary period clause that runs concurrently with the trial period provision (this will invalidate the trial period)
  • it must be for a specified period (not exceeding 90-days) starting at the beginning of the employee’s employment
  • the employee must be new to the employer. That means if there is an existing employment relationship between the employee and the employer, no matter how long that relationship is, the trial period will not be valid
  • the employee’s offer of employment must contain the trial period. The best way to do this is to attach the proposed employment agreement, including the trial period, to the offer of employment, highlighting the trial period, and
  • the employee must sign and return the employment agreement including the trial period before commencing work.
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Can an employee still bring a personal grievance if they are dismissed pursuant to a trial period?
Where the trial period is valid, the employee is barred from raising a personal grievance for unjustified dismissal.

If the trial period is invalid (i.e. any of the above requirements are not met), the employee could raise a valid personal grievance for unjustified dismissal if:

  • the dismissal is substantively unjustified (i.e. there is not a good reason to justify the dismissal), and/or
  • the employer has failed to follow a procedurally fair process.

However, notwithstanding the trial period provision, the employee is able to raise a personal grievance for unjustified disadvantage, or any other claims (including discrimination claims) that do not relate to the termination of their employment.

We have a best practice trial period provision that can be included in your employment agreements. We can also provide robust employment advice if you are seeking to dismiss an employee under a trial period provision or defending a claim for unjustified dismissal.

Edwards Law has employment lawyers NZ wide with offices in Auckland, Hamilton, Tauranga and the Hawkes Bay. For specialist employment advice, and to speak to an employment lawyer directly, call 0800 339 002.

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