By Paul O’Neil, Head of Legal and General Counsel, Employers and Manufacturers Association
The new government hasn’t wasted any time changing New Zealand’s employment law through the passing of the Employment Relations (Trial Periods) Amendment Act, which has reintroduced 90-day employment trials for all businesses.
Ninety-day trials, which were previously only available to employers who had fewer than 20 staff, are intended to reduce the risk to businesses when employing someone new, hopefully making them more willing to give prospective employees a chance.
If things don’t work out, you can end the employment without the risk of them bringing a personal grievance for unjustified dismissal.
But the legislation has some important checks and balances in place to protect employees, and it is important that you get the process right to avoid an uncomfortable date with the Employment Relations Authority.
And when it comes to trial periods, both the Employment Court and the Employment Relations Authority take a strict approach when determining whether employers have complied with the Act.
In fact, statistics from the Ministry of Business, Innovation and Employment (MBIE) show that between 2015 and 2023, 75% of all 90-day trial provisions that were challenged in the Employment Relations Authority were found to be invalid. This was largely because employers did not meet the necessary procedural requirements.
So, what are the rules when using a 90-day trial period when employing someone new?
First, you can only use a trial period for new employees. Trials cannot be used if an employee is already working for you or if you have previously employed them.
Second, if you are employing someone subject to a 90-day trial, you need to write it into the employment agreement. Note that you will need to specify the length of the trial in days, which can be up to a maximum of 90 calendar days.
Be sure to draw the employee’s attention to the trial clause contained and let them know of their right to seek independent advice. You need to ensure you allow reasonable time for them to consider the offer and obtain this advice.
Critically, for a trial to be valid, the employee must sign the agreement and return it before they start work.
This is important, because if they start work before signing their employment agreement, the trial period will likely be considered invalid by the Authority.
Finally, you need to include a notice period in the employment agreement. Remember that this notice period applies during the trial period.
It is also important to understand that all other employment law applies.
For example, all employees are protected from harassment, discrimination or unjustified disadvantage, and are eligible for all other minimum entitlements.
Not meeting these requirements, even if an employee is subject to a trial, may mean they can bring a personal grievance.
You also need to remember that good-faith obligations still apply.
That means providing an employee with the necessary training and feedback and a reasonable opportunity to address concerns and improve their performance.
The Authority will likely take a dim view if these good-faith obligations are not met.
Should things not work out and you wish to dismiss an employee under the trial provisions, there is a process you should follow. This includes writing to the employee, going through an engagement process and giving them the opportunity to seek independent advice and to bring a support person.
You will need to notify them of any issues previously discussed, advise them you are intending to terminate under the 90-day trial period, ask for any comments and consider their response.
Finally, if you decide to terminate, you should advise this verbally and follow up in writing to ensure you’ve properly followed any notice requirements.
The new legislation aims to balance reducing the risk to employers while also providing safeguards for employees.
If you need any help or support, call our Member AdviceLine on 0800 300 362 or visit www.ema.co.nz.
