Trial period provisions continue to cause headaches for employers in New Zealand

Employment

A recent case serves as a reminder to employers that the Employment Relations Authority is continuing to take a strict approach to interpreting and applying trial period provisions.

The recent Employment Relations Authority case of Honey v Lighthouse ECE Learning Limited [2016] NZERA 284 serves as a reminder to employers that the Authority and Employment Court are continuing to take a strict approach to interpreting and applying trial period provisions.

Ms Honey was employed as an Early Childcare Teacher by Lighthouse ECE Limited. Her employment agreement included a 90 day trial period provision. The employer felt that Ms Honey’s performance was not up to the required standard during the first six weeks of employment and terminated her employment under the trial period.

Ms Honey and three other employees terminated under the trial period around the same time challenged the validity of the trial period provision on the grounds that it did not comply with the requirements of the Employment Relations Act 2000 (the Act). Specifically, s 67A(2) states a “Trial provision means a written provision in an employment agreement that states, or is to the effect, that –  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…” (emphasis added).

The clause in Ms Honey’s agreement stated “A trial period will apply for a period of ninety (90) days (…) under s.67A Employment Relations Act 2000, to assess and confirm the suitability of the Employee for the position (…)”.

Ms Honey said this did not meet the requirements of s 67A(2) because it did not state when the trial period would begin. The employer argued the trial period did meet the requirements because the commencement date was set out in a schedule to the employment agreement and it was clear that the parties intended the trial period to begin at the commencement of Ms Honey’s employment.

The Authority found that the trial period clause did not expressly state that the trial period started at the beginning of Ms Honey’s employment. It was therefore necessary to decide whether or not the reference in the clause to the fact that the trial period would “apply for a period of 90 calendar days” met the requirement of s 67A(2) that the clause is “to the effect” that it started on Ms Honey’s first day of employment.

The Authority found that those words did not reasonably imply that the 90 days started on Ms Honey’s first day of employment, and that the failure to specify when it would start, or include words to that effect, meant Ms Honey was not effectively advised of when the trial period would commence. The employer was therefore prohibited from relying on the trial provision.

This case is a timely reminder to all employers to check your employment agreements and ensure they strictly comply with the requirements of the Act. Unfortunately we see too many employers rely on trial periods which seem adequate, but when scrutinised in light of these recent cases are at real risk of being held invalid if challenged in the Authority.

If you have any questions about this or would like our Employment Team to review your employment agreements, please contact either AJ Lodge ashley-jayne.lodge@cavell.co.nz, or Chris Newman, christopher.newman@cavell.co.nz.

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