Ensure your employment agreements are up to date

Over the last year, there have been a number of changes to employment law, including the timeframe for personal grievances, sick leave, and bereavement. As you may have noticed, the new government is planning to reinstate to all employers the use of 90-day trial periods.  The change is expected to take place imminently.  With all these changes, and the proposed change to trial periods, now is an excellent opportunity to review and update your employment agreements, ensuring they are current and up to date.

Why should we include a trial period in the employment agreement?

A trial period is a tool that can be used by employers to find out if an employee is suitable for a role. During the trial period, an employer can dismiss the employee and the employee cannot raise a personal grievance for unjustified dismissal, so long as the trial period is valid.  Trial periods if used correctly, are a great tool for employers. However, trial periods are often challenged, so employers must know when to use them and what is required.

Common Misconceptions

There are many misconceptions among employers about trial periods. These include the idea that a trial period is an easy out for employers as they can immediately dismiss employees during the 90 days and that they are a viable arrangement for temporary employment. This is not the case.

Trial periods cannot be longer than 90 days and, provided the trial period is valid, employers must give the requisite notice of termination within the 90 days, if they wish to end the employment in reliance on the trial period.

Key points to ensure a valid trial period

The courts interpret trial periods strictly, because of the significant imbalance of power they create, as a result, getting it wrong can be costly. We outline below key points you need to know if you are relying on a trial period clause.

• The trial period clause must comply with the requirements of Sections 67A and 67B of the Employment Relations Act 2000.• The trial period begins when the employee commences work and can be for up to 90 days.

• The employment agreement must specify when the trial period commences and how long the trial period will be.

• The employment agreement containing the trial period must be agreed to by both parties and signed by both parties before the new employee commences work.  

• The employee must be given the opportunity to seek independent legal advice.

• The employee must be a new employee and have not worked for the employer previously.

• During the 90 days an employer can dismiss an employee if they are not right for the role.    

• The employer must give the employee the appropriate written notice within the trial period even if the dismissal date occurs outside of the trial period.

• The written notice should specify the trial period clause the employer is relying on and state if the employee is required to work their notice.

• The employer does not have to give reasons for the dismissal however if the employer is asked, they should provide reasons.

• The employee cannot bring a personal grievance for unjustified dismissal however, they can bring other proceedings in relation to the dismissal, for example discrimination or harassment.

If the above requirements are not met, the trial period will not be effective. In particular, failure to get the employee to sign the employment agreement before commencing work, failure to give the appropriate notice to terminate employment or failure to give the employee notice to terminate employment correctly, will mean the trial period is invalid and the employee will likely have a valid personal grievance.

It is important to remember that during any termination process, the employer must act in good faith.

We can assist to ensure your trial period clause is fit for purpose. We also recommend that you seek legal assistance before terminating employment in reliance on the trial period provision.

Let us know if you would like us to review your agreements ready for 2024, or you would like to discuss other matters related to this article:

Email: mjohnston@mcveaghfleming.co.nz

DDI: 09 306 6729