Employment 90 Day Trial Period Clauses

Legislation was introduced by the National Party to enable employers to take on new employees in a more risk free environment. The idea behind this piece of legislation is that this should encourage employers to take on more employees. It means that, for whatever reason should the employment relationship not work out within the first 90 days, the employer can terminate the employment relationship. This can be done without the risk of the employee raising a personal grievance and then dragging the employer through the resolution process that can be very time consuming and costly.

There are very strict parameters around this piece of legislation in order for it to be used for this purpose and not just as a mechanism to aid the employer to chop and change employees at will. There has now been three significant cases before the employment court that have defined the use of this clause even further. The ramifications of this is that there are many employers and employees that believe their employment agreement is subject to a 90 day trial period, when this clause within their employment agreement would not stand up as valid in our courts. To the horror of employers and to the delight of employees, this is not normally discovered until there is an employment relationship problem. An issue for employers is that it is impossible to retrospectively fix any defects in their 90 day trial period clause should they discover that it is currently invalid.

Let's now look at this clause in two ways. Firstly, what is needed to make it valid and secondly, common reasons that make it invalid.

For a 90 day trial clause to be valid:

1. The employee must not have worked for the employer previously.
2. It must be communicated to the employee in writing that their employment is subject to a 90 day trial period before the employee accepts the offer of employment, irrespective of that acceptance being verbal or written.
3. The employee is advised in writing that they have the right to seek independent advice and they are given adequate time to seek such advice.
4. The written clause in the employment agreement must include the specific wording as per section 67A of the Employment Relations Act 2000.
5. The agreement needs to be signed by both parties or the employer needs to be able to show that they have taken multiple significant steps to get the employee to sign the agreement prior to work commencing.
6. Notice of termination needs to be given to the employee within the 90 days. However, it does not matter if the final day of this notice period is outside the 90 days.

Common reasons why a 90 day trial clause has been proved invalid:

1. The employee had worked for the employer previously.
2. The employee was only informed in writing about the 90 day trial clause being included in their employment terms and conditions after they accepted the verbal or written offer of employment.
3. The wording in the written employment agreement does not meet the requirements of section 67A of the Employment Relations Act 2000.
4. The employee has never been given a written employment agreement.
5. The employer did not attempt to get the employee to sign the employment agreement prior to the employment commencing or within a short period of time from the employment commencing.
6. The employer has informed the employee that they are extending the trial period beyond the initial 90 days.

For employers, it is best practice to get advice on the use of this clause.

For employees that are terminated under this clause, it is best to get advice as to the validity of the clause in your particular situation.

For any clarification of the issues around the 90 day trial legislation, please don't hesitate to call me on 0800 HELP ME (0800 435 763) or drop me an email to danny.gelb@employmentlaw.net.nz