Since the introduction of trial periods in 2009, the Employment Relations Authority and the Employment Court have interpreted both the legislation on trial periods and the clauses themselves strictly and (generally) in favour of the employee.  The view is that the trial period provisions remove the basic right for employees to claim unjustified dismissal and should therefore be subject to strict interpretation.

Caselaw has taught us that:

  • ‘new employees’ are employees who have not yet started work or accepted a verbal offer of employment. This is important because trial periods can only apply to new employees.  For a trial period to be valid the employment agreement must be signed before the employee starts work and the employee must not have accepted a verbal offer of employment which did not reference the trial period.  Therefore, it is sensible for employers to make offers as follows: ‘we are going to make you an offer of employment.  The terms of the offer will be set out in a draft employment agreement’;
  • trial periods do not apply to summary dismissals. Trial periods are designed to deal with poor performance or where an employee is not suitable for a role. You can still dismiss summarily for serious misconduct (or in other limited cases) during the trial period but the employee can claim unjustified dismissal so the employer must have a good reason for the dismissal and follow a fair process;
  • there has been conflicting caselaw on whether employment can be terminated during a trial period by providing a payment in lieu of notice. To be on the safe side, it is sensible for employers to dismiss on notice.  If the notice period is short, this should not cause a problem.  An employer could also seek to obtain the employee’s agreement that he or she will not be required to work during the notice period;
  • when dismissing under a valid trial period, the employer does not have to comply with the statutory requirement to provide (on request) a statement of the reasons for an employee’s dismissal . However, employers must still comply with their general duty of good faith. As this includes a requirement to be ‘responsive and communicative’, if the employee asks for a reason for the dismissal, this should be provided.

In the recent Employment Court case of Farmer Motor Group Limited v McKenzie [2017] NZEmpC 98 (FarmerMotorGroupvMcKenzie) the relevant employment agreement contained a valid trial period and notice provisions which required notice to be given in writing and gave the employer a right to make a payment in lieu of notice.  The employee was given verbal notice of termination of employment during the trial period and paid in lieu of notice.  The Employment Relations Authority had found that because the employer had failed to give written notice as required by the employment agreement, it was prevented from relying on the bar to bringing personal grievance for the dismissal.  The employer challenged this finding. The Employment Court dismissed the challenge and upheld the decision of the Employment Relations Authority.

The warning for employers is when given notice of termination during a trial period (or otherwise), check the employment agreement to see how notice should be given. If the agreement requires the notice is provided in writing, comply with this requirement.

Disclaimer: The above information is for information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on the information given.