The end of 90 day trial periods, for some.

Employment

The Employment Relations Amendment Act 2018 (the Amendment Act) has received royal assent, meaning it has passed into law. Some provisions of the Act have taken effect already, with the remainder to take effect on 6 May this year.

Hailed “the start of a progressive programme in workplace relations” the Amendment Act makes a number of universal amendments to the Employment Relations Act 2000 (the Act).

One such change is the restriction on the use of 90 day trial periods to only those businesses that employ 19 or fewer employees.

Trial periods allow employers to circumvent the usual procedural and justification requirements contained within the Act when dismissing during the first 90 days of an employee’s employment. The employee is then prohibited from bringing a personal grievance in respect of the dismissal.

Trial periods are beneficial for both business and job seekers, in that they incentivise employers to take chances on prospective employees that they may not otherwise.

Nevertheless, from 6 May 2019, employers with 20 or greater employees (large employers) will no longer be able to include trial periods in their employment agreements.

Those employers may wish to look to alternatives. Of course all employers, but especially large employers, should ensure that they complete extensive due diligence on prospective employees before making any offers of employment. Those offers should be made conditional on the satisfactory return of references and police checks. Employees should not be allowed to commence work until the references and checks have been returned to the employer’s satisfaction.

In addition, with the removal of trial periods, large employers may also look to include a “probationary period” clause in their employment agreements as an alternative to trial periods.

Probationary period clauses

Section 67(1) of the Act allows for parties to an employment agreement to agree that an employee will “serve a period of probation after the commencement of the employment”.

Probationary period clauses are not trial periods. The Act explicitly states that a probationary period does not affect the law relating to unjustifiable dismissal. This means any dismissal imposed pursuant to a probationary period must meet the procedural and justification tests contained within the Act, and an employer is required to provide reasons for such a dismissal if requested.

A probationary period puts an employee on notice that their performance is being monitored. Where, during the probationary period, an employee’s performance is lacking, an employer is expected to raise that with the employee, provide appropriate training and support, and allow a reasonable time for the employee to improve their performance to the desired standard.

Only once an employer has genuinely, and repeatedly, assisted an employee to improve his or her performance during the probation period without success, may that employer look to terminate the employee’s employment pursuant to the probationary period clause.

Employers should keep in mind that they will be required to meet a high threshold in imposing a dismissal, and the employment institutions will expect an employer to have exhausted all reasonable alternatives to termination.

It will not be justifiable to terminate an employee for not being “the right fit” at the end of the probationary period.

A probationary period must be included in an employment agreement to be valid. Employers should take care to ensure that any probationary period provision is drafted with the realities of the business in mind, meaning that the business can adhere to the terms of the provision, and that the terms are reasonable.

If you have any questions about the application of probationary or trial period provisions, please get in touch with us. This is a highly technical area of the law, and can be costly to get wrong. Given the recent, and impending changes to employment legislation, it is also a good time to update your employment agreements.

Contact Cavell Leitch’s employment team at cavell@cavell.co.nz

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