Ensuring that a trial period clause is valid

The technical requirements of the Employment Relations Act 2000 (‘ERA’) must be met in order for a trial period clause to be enforceable.  As the Employment Court has stated, sections 67A and 67B of the ERA (which allow for trial periods to be used) will be interpreted strictly because it is legislation that removes a person’s access to courts and tribunals.

The following case notes illustrate some common mistakes in drafting or implementing a trial period clause.

Trial period not included in initial employment offer

In Blackmore v Honick Properties Limited (24 November 2011) the Employment Court held that the trial period referred to in the employment agreement was invalid.

In this case the employee (a Farm Manager) was sent a letter which offered him employment. In that letter there was no mention of a trial period. The employee accepted the offer of employment via email and resigned from his previous employment, moving his family to the new farm a month later.  He then began work at 7am on a Monday morning.  At 8am that day, the employee was given an employment agreement. The essential elements of the agreement were pointed out to the employee and he was asked to initial any changes. The employee was not advised to seek independent advice and it seemed clear that the employer wanted him to sign it there and then. The employee made a reluctant decision to do so, as he was uncertain about what might happen if he did not agree to sign it. The employment agreement specified that it had come into force that same day.

Around 2½ months later, the employee was told that his employment would not continue after the end of the 90 day trial period. Two weeks’ notice of dismissal was then given, shortly before the 90 day period was due to expire.

The Employment Court held that the Farm Manager had become an employee when he had initially accepted the offer of employment made to him by the employer.  He had been an employee since that time, although he hadn’t started work until a month later.  This meant that the trial period in the employment agreement subsequently presented to him on his first day of work was invalid, because he was an employee who had been ‘previously employed by the employer’ (as per the special definition of employee is s67A(3) of the ERA).  The Court considered that at the very least, his employment had commenced at 7am on the Monday he started work, which was also before the employment agreement containing the trial period provision was signed.

Another important factor in this decision was the Court’s finding that the trial period clause had been unfairly bargained for, as the requirements of s63A of the ERA (to provide a copy of an intended agreement and allow a reasonable opportunity to seek advice) had not been met.  This meant that the trial period clause would be liable to be deleted with retrospective effect, even if the timing issue had not been a factor.

Trial period clause did not contain requisite elements

In Rix-Trott v The Freight People Limited (16 February 2012) the Authority held that a probationary period of 90 days that was referred to in various documents (including in the employment agreement) did not comply with section 67A of the ERA. This was because the documents only referred to a 90 day probationary period and did not contain: (a) a provision outlining that the employer could dismiss the employee during the trial period, or (b) a provision stating that the employee is not entitled to bring a personal grievance claim or other legal proceedings against the employer.  As such, there was no valid trial period applicable.

Employee commenced a day earlier than trial period effective

In Hart v 32 Gems Dental Care Limited (14 November 2011) the Authority again held that a trial period provision was invalid.  In this case, the employee was found to have been ‘previously employed’ because she had started work one day early.  This occurred when the temporary employee engaged by the employer called in sick, so the employee was contacted to ask whether she would be able to start a day early.  The employee had received and signed an employment agreement by then, but forgot to bring it into work that day, so it was not yet signed by the employer.  The employer then signed the employment agreement on the employee’s second day of work, at morning tea time.

The Authority held that because the employee had started work one day early, and because the parties had not varied the employment agreement to take effect from that earlier date, she was not a new employee when the agreement was signed by the employer the following day. Rather, the agreement took affect according to the start date noted in the agreement.  Because she was not a new employee on the day the employment agreement came into effect, the trial period was invalid.

Key lessons:

A valid trial period clause

  • The trial period must be in writing and be contained in the employment agreement – s67A(2)
  • The trial period clause must state, or be to the effect that (s67A(2)):
    • the employee is to serve a trial period for a period not exceeding 90 days
    • during that period the employer may dismiss the employee
    • if the employee is dismissed during the trial period, the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.
  • The employee must not have been previously employed by the employer, so the trial period clause needs to be provided to a prospective employee as part of the initial offer of employment – s67A(3)

Fair bargaining

  • The employer must give the employee a copy of the intended agreement – s63A(2)(a)
  • The employer must advise the employee that he or she is entitled to seek independent advice – s63A(2)(b)
  • The employee must be given a reasonable opportunity to seek advice about the terms of the offer of employment – s63A(2)(c).

 

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One Comment

  1. Thanks Tim. Good to hear!

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