What You Need to Know About 90 Day Trial Periods

90 Day Trial Periods

90-day trial periods are a common clause in your run of the mill employment contracts in New Zealand, however this does not mean that they are always carried out correctly and if they aren’t, then there may be cause for a personal grievance. These provisions are governed by the Employment Relations Act 2000 (ERA) under sections 67A and 67B, which states when an employment agreement is eligible to contain 90-day trial period and the effect this trial has on the employment.

As per section 67A of ERA, an employment agreement can only contain a trial period if the employer is small-to-medium sized, which is an employer with fewer than 20 employees at the time of when the employment agreement is entered into. This means that if the employer has over 20 employees and the employment agreement contains a trial provision, it would be deemed invalid. Section 67B states that the principle of a 90-day trial is that for the first 90 days of a new job, if the employee is dismissed during the trial period, they will not be able to bring forward a personal grievance in respect of the dismissal.

One of the leading cases in New Zealand regarding the 90-day trial is Smith v Stokes Valley Pharmacy (2009) Ltd, in which Chief Judge Colgan sets out the fact that these sections need to be followed and interpreted strictly, due to the fact that these provisions essentially remove the employee protections and access to justice. This case demonstrated how, if the provisions regarding a 90-day trial are not followed strictly, it can open the door to a number of grievances for unfair dismissal.

What is an Invalid Trial Periods

For the trial period to be valid, there are a number of criteria to be applied before it can be considered a valid provision. Firstly, it must be agreed upon by both parties to the agreement before the employment starts and it must be in writing within the signed employment agreement.

A verbal agreement will not hold up. Secondly, it must be clear on the start date of the trial period, such as stating that the trial is to start on the first day of the employment. Lastly, it must clearly state the exact number of days of the trial period. If the employment agreement states that the trial period is “not exceeding 90 days” this will not be considered a valid trial period. It must state that the trial period is 90 days.

One of the more obvious ways a personal grievance can arise in relation to a trial period is if the employee is dismissed too late. The 90-day trial period begins on the day the contract is signed and runs for 90 calendar days. If the employee is dismissed any later than that, then they would be completely within their rights to raise a personal grievance for an unfair dismissal.

New Employees

Smith v Stokes Valley Pharmacy (2009) Ltd also reiterated the fact that the 90-day trial provision can only be used when the employee is a new employee. If the employee has been an employee before, a 90-day trial provision is not applicable. This is also true where an employee signs the employment agreement after they have already begun work for the employer. As in Smith v Stoke Valley Pharmacy (2009) Ltd, if the employee began working and the next day signed the employment agreement, they would not be considered a new employee due to working the previous day and therefore any trial period would be invalid.

In Smith, the employee in question, Ms. Smith, was working at Stokes Valley Pharmacy Limited when it was sold to new owners who wished to re-interview and re-hire staff. Ms. Smith was rehired and started her employment on 1 October 2009, however no employment agreement had been signed. The next day, Ms. Smith had a meeting with the new owners and proceeded to sign the employment agreement, which included a 90-day trial provision. Ms. Smith was then dismissed on the 8 December 2009, which would have been within the 90-day period. However, the trial period was deemed to be invalid as she had begun work for the employer the day before her contract was signed, and therefore was not a new employee. This resulted in Ms. Smith’s personal grievance for unjustified dismissal succeeding. This “new employee” test has been applied strictly by the Court in following incidents.

Navigating the law surrounding trial periods can be difficult and confusing, so if you need more information or advice from one of our specialists regarding trial periods, please do not hesitate to contact IR Thompson Associates Ltd in Christchurch on 03 383 9988 or send us an email at admin@irt.nz.