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One of the notable law reforms which was touted in Labour's election campaign has been unveiled in the Employment Relations Amendment Bill 2018 ("Bill") - the restriction on the use of the 90 day trial period.
The good news for employers with 19 employees or less is that trial periods can still be included in employment agreements.
This nod can be attributed to coalition partner, New Zealand First, who pushed to keep the 90 day trial period in place for small and medium enterprises ("SMEs"). The retention of the 90 day trial period is welcome relief to employers of SMEs that make up 97 per cent of the New Zealand economy who rely on the provision as a safety net to recruit staff. Although, in reality the number of businesses that will not be restricted is limited given SMEs only employ 29 per cent of employees in New Zealand (Statistics New Zealand).
Conversely, under the Bill, employers with 20 employees or more will lose the right to include trial periods in employment agreements.
The corollary is that it is anticipated employers will act more conservatively about recruitment before offering employment. That said, employers will still have the option of including probationary clauses in their employment agreement. However, the distinguishing application is that probationary clauses provide the ability for employees to raise a personal grievance claim for unjustified dismissal. In addition, employers have an obligation to give reasons for termination of an employee's employment.
Equally, unions will object to 90 day trial periods remaining in place for SMEs. Bill Newson, national secretary of the largest private sector union, E Tū, has publicly gone on record to state that the union would be arguing at the select committee stage for the 90 day trial periods to be scrapped completely.
The Bill is currently before the select committee and submissions are being invited by the public. The Bill has already been met by opposition by SMEs and unions.
Nevertheless, it is likely that the Bill will be passed into law in its current format by the end of 2018. A report is due on 1 August 2018 which will include any changes to the Bill.
We recommend consulting with our team of experts at an early opportunity to ensure protections are already in place for your business before the legislation is amended.
If you have any questions or would like more information regarding 90 day trial periods or probationary clauses, please contact contact James Turner on (09) 966 3603 (jturner@mcveaghfleming.co.nz) from our Albany Office.
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© McVeagh Fleming 2018
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
