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90 Day Trial Periods

From 23 December 2023, all employers can use 90-day trial periods in employment agreements with new employees. If an employee is dismissed during a valid 90-day trial period then the employee cannot bring a personal grievance in respect of that dismissal.

How to approach the 90 Day Trial Period

The first Employment Court decision about 90 day-trial periods, Smith v Stokes Valley Pharmacy (2009) Limited [2010] NZEmpC 111, made the following comments about the (then new) law:

[48] Sections 67A and 67B remove longstanding employee protections and access to dispute resolution and to justice. As such, they should be interpreted strictly and not liberally because they are an exception to the general employee protective scheme of the Act as it otherwise deals with issues of disadvantage in, and dismissals from, employment. Legislation that removes previously available access to courts and tribunals should be strictly interpreted and as having that consequence only to the extent that this is clearly articulated.

The Court went on to say:

[83] The new sections are neither simple nor the very broad and blunt prohibition against bringing legal proceedings that is sometimes portrayed rhetorically. They provide a specific series of steps to be complied with cumulatively before a challenge to the justification for a dismissal can be precluded. There is a risk to the employer of disqualification from those immunities if these steps are not complied with. Significant obligations of good faith dealing remain upon employers.

This approach to 90-day trial periods has been approved by the Court of Appeal and is followed by the Employment Relations Authority and the Employment Court.

Since 90-day trial periods were first introduced in 2009, there have been more than 180 Employment Relations Authority determinations considering terminations under 90-day trial period clauses. The employee successfully challenged their dismissal in more than 130 of those cases.

What not to do

There are many lessons that can be taken from that case law about what not to do if you want to use a 90-day trial period. We summarise the key lessons below:

Don’tInstead
Use a 90-day trial period with a previous employee.Only use 90-day trial periods with new employees.
Use a paid skills assessment as part of your interview process. In general, we recommend against skills assessments during interviews. If a skills assessment is appropriate, then:
– ensure all parties are clear that this is voluntary and is not work;
– don’t use any product created by the applicant in the skills assessment (for example, if the skills assessment relates to a barista making coffee, don’t sell the coffee to the public)
– don’t provide any item or service of value in exchange for the skills assessment (even a salad bowl!)
Use a non-compliant trial period clause.Get your clause reviewed. The requirements of a valid 90-day trial period clause include:
– it must specify that the trial period starts at the beginning of the employee’s employment (ideally, on a date specified in the Agreement)
– it must specify the exact period of the trial (in other words “90 days” not “up to 90 days”)
– it must explain that the employer may dismiss the employee during the trial period and if the employer does so the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.
 
The MBIE employment agreement builder has an example 90-day trial period clause.
 
A previous version of the clause was found by the Authority to not comply with the Act. It has since been updated and the current clause is OK.
Verbally offer employment to the employee before you send them their letter of offer and employment agreement.Call the employee to let you know that:
– you’re sending them an offer of employment,
– the offer of employment is subject to a 90-day trial period (and other conditions) that are set out in the letter of offer,
– the offer has a deadline for acceptance,
you will need to receive a signed copy of the letter of employment and employment agreement before the first day of work
– they are entitled to seek independent advice about the offer of employment
 
Give the employee less than three working days to consider the offer of employment.Provide the offer of employment to the employee at least one clear week before the proposed start date so that the employee has time to obtain independent advice.
Refuse to consider or respond to issues the employee raises about the agreement.Negotiate with the prospective employee in good faith – this is required by section 63A of the Act!
Allow the employee to start work before they have signed the employment agreement and letter of offer and have provided copies to you.The letter of offer should provide that the employee can accept the offer by returning a signed copy of the letter of offer and employment agreement to you. (And, ideally, should explain that if the offer is not accepted by a particular date, the offer lapses.)
 
If the prospective employee has not returned a signed copy of the employment agreement to you by the proposed start date you should contact them to let them know either:
– that the offer has lapsed and is no longer able to be accepted, or
– that they have not accepted the offer of employment in accordance with its terms and accordingly you will issue a new offer with a new proposed start date
Ignore the duty of good faith during the trial period.Continue to be responsive and communicative. Raise concerns about performance and give the employee a genuine opportunity to improve.
Dismiss the employee without notice during the trial period.Make sure you give the period of notice that is required by your 90-day trial period clause.
 
This should be no less than one week.
If the clause allows you to pay the employee in lieu of requiring them to work during the notice period, then you can do that.
Give the employee notice of their dismissal under the trial period clause after the trial period has ended.Give notice of termination of employment under the 90-day trial period clause within the 90-day trial period. The notice period itself can end outside of the trial period. 
Use a 90-day trial period clause to employ a worker on an Accredited Employer Work Visa.Offer employment that is not subject to a 90-day trial.

Want to find out more about 90 day trial periods? Get in touch with us.

Sean Maskill
PARTNER

+64 6 759 5317
+64 27 555 1697
sean.maskill@abmm.co.nz

Philip McCarthy
PARTNER

+64 6 759 5322
+64 27 914 6796
philip.mccarthy@abmm.co.nz

Kayleigh Duncan
LAW CLERK

+64 6 759 5310
kayleigh.duncan@abmm.co.nz

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