Employers beware: 90-day trial periods further restricted

Employers beware: 90-day trial periods further restricted

In a previous blog, we reviewed the common traps that may serve to void 90-day trial period clauses. A recent decision from the Employment Relations Authority has further restricted the enforcement of 90-day trials, creating a new trap that will potentially catch out many employers using their standard agreements.

Employee signing contract

“This case serves as a reminder to employers to be thorough and precise in their drafting of 90-day trial clauses. “.

In four related decisions released in August 2016, the ERA held that a 90-day trial clause was invalidated if it did not expressly state the trial period’s start date. Four early childcare teachers were employed by Lighthouse ECE Limited, which terminated their employment under the 90-day trial period provision in their respective employment agreements. While the start date of employment was listed in each agreement, the trial period clause did not cross-reference or include this date.

The crux of the matter was based on section 67A(2) of the Employment Relations Act 2000, which provides:

Trial provision means a written provision in an employment agreement that states, or is to the effect, that:

  • For a specified period (not exceeding 90 days), starting at the beginning of the employee’s employment, the employee is to serve a trial period
  • During that period the employer may dismiss the employee
  • If the employer does so, the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal

The Authority found it was not expressly stated or reasonably implied that the 90 days started on the first day of employment, and the Authority member did not accept submissions that this was an “overly technical interpretation”.

It was held that the employment agreement did not imply that the trial period would be starting at the commencement date of employment because there were a number of possible circumstances in which parties may agree that the trial period starts later. Lengthy inductions, overseas temporary placements and secondment work were given as examples of when it would be foreseeable that the parties may have decided that the trial period should start later at the date when the employee actually starts work they have been employed for. While none of these examples were relevant on these facts, the Authority held that this showed it cannot be implied that all trial periods will start on the commencement date of employment. From this case, we can now assume that any trial provision that does not specify a start date for the trial may be deemed unenforceable.

Some doubt must be cast over the correctness of this decision. It seems that, on the plain wording of section 67A(2), a trial period can only start at the beginning of the employee’s employment, and there is no other interpretation that would allow a different start date for any trial.

This case serves as a reminder to employers to be thorough and precise in their drafting of 90-day trial clauses. While this strictly technical interpretation may be overturned in the near future, presently, it has created yet another pitfall in the already precarious interpretation of these clauses.

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