How To Manage A Trial Period Effectively

Published 28 June 2022 | 4 min read

Here at EQ, we deal with and support employers through a range of different matters. Recently, we supported some clients through the process of invoking the 90-day trial period clause. The 90-day trial period law actually has a number of fishhooks that can catch employers out. If you are not aware of these nuances, you may be subject to a personal grievance for unjustifiable dismissal.

The 90-day trial period is a very important part of the employment law landscape within New Zealand. In 2019, it was modified to only apply to small to medium sized employers – those with less than 20 staff.

What does the law say?

Sections 67A and 67B of the Employment Relations Act allow an employer to dismiss an employee if:

• the employee has not been employed by that employer before;
• the employer had less than 20 employees at the start of the day that the employment agreement was entered into;
• there is a clause in a written employment agreement with the new employee specifying certain details of how the 90-day trial period will operate; and
• the employer gives notice to dismiss the employee within the trial period.

Important Points:

A trial period must be agreed to in the employment agreement before the employee commences work. To avoid a potential unjustifiable dismissal, ensure that you receive the signed agreement (which includes the trial period) at least a day before they commence work, not the morning they start their employment.

The employer doesn’t have to give reasons for a dismissal during a trial period or give the employee a chance to comment before the dismissal, but it is good practice to tell the employee why they are being dismissed and employers must give a reason if the employee asks for one.

Double, triple check. Make sure that the agreement you sent out for the new recruit to sign is the agreement that is returned and fully signed. For example, the individual may send back a version excluding the trial period and that becomes the agreement between the employer and employee.

Employees' rights and responsibilities:

Employees on trial periods must be treated equal to the way other employees are treated. They have all the minimum employment rights and responsibilities (minimum pay, public holidays, sick and bereavement leave etc), except bringing a personal grievance for unjustified dismissal.

Notice of Dismissal

When you decide to dismiss the employee within the 90-day trial period, you must give notice to the employee that they will be dismissed.

The notice:

• must be the amount of notice in the employment agreement. If the employer doesn’t give the employee the right amount of notice, then the trial period is invalid and the employee will continue to be employed (or if they were dismissed, they could bring a personal grievance for unjustified dismissal). For example, the employer can’t tell the employee that they are dismissed effective immediately if there is a 1-week notice period in their employment agreement.
• must be given within the trial period, even if the actual dismissal takes effect after the trial period ends. For example, if the trial period is 8 calendar weeks and the notice period is 1 week, the employer must give notice to the employee before the end of the eighth week, even though the employee won’t leave until the end of their notice period.
• doesn’t have to have reasons for the employee’s dismissal.
• Can either be worked out or paid in lieu. It is up to the employer and employee, or whatever is written in the agreement.

If you have any questions or queries when invoking the 90-day trial period clause, please don’t hesitate to reach out to us. We have created a handy checklist which is available in the Document Library; download here. Otherwise, we have included this below:

90-Day Clause validity requirements

• Can only be used if you had 19 or fewer employees at the time you appointed the employee.
• Can only be used for new employees (i.e. someone not previously employed by the employing entity).
• Trial period must be included in the Individual Employment Agreement (IEA) and not just in the letter of offer.
• The IEA must have been agreed and signed before employment started. Best practice is to have the signed agreement returned before the employee’s first day of work.
• Must outline terms and impact of trial period (as per legislation):
• for a specified period (not exceeding 90 days), starting at the beginning of the employee’s employment, the employee is to serve a trial period; and
• during that period the employer may dismiss the employee; 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 IEA must specify the date on which the 90 Day trial starts.

Employer’s obligations during trial period:

• Must comply with the duty of good faith, which means being active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative. At a minimum, the employee needs to know what is expected of them and be told along the way if they are falling short of expectations.

Requirements if terminating under trial period:

• Best practice is to call the employee to a meeting to discuss and deliver message face to face.
• Best practice is to communicate the reason for termination, so as to guard against any suggestion that the termination was for a discriminatory reason, and to meet good faith obligations.
• Notice of termination must be given before the end of 90-day trial period.
• Notice can be paid in lieu of the employee working out the notice period if:
• Notice is given and accords with the employment agreement.
• The notice is clear and unambiguous and explains how and when employment will be terminated.
• Payment in lieu of notice is not sufficient notice in and of itself.

Note: Trial period doesn’t prevent other claims such as breach of good faith, unjustified disadvantage, discrimination, sexual and racial harassment, duress, compliance with Part 6A, ss 67C, 67D, 67G, 67H of the Employment Relations Act 2000.