Are you interested in knowing more about trial periods? If you have 20 or more employees, you too will be able to take advantage of trial periods (with effect from 1 April 2011) for new employees.
However, unless your trial period is drafted correctly and implemented at the right time, it will not be valid.
Two important updates in the area are discussed below.
New Law
As you may be aware, the Government has passed a Bill which extends the scope of 90 day trial periods. Currently, trial periods are only available to employers with fewer than 20 employees (i.e. 19 or fewer employees).
However, with the passing of the Employment Relations Amendment Bill (No 2), trial periods will be available to all employers from 1 April 2011.
First Court Case
In August 2010 the Employment Court delivered its first decision on the interpretation and application of the trial period provisions in the case of Smith v Stokes Valley Pharmacy (2009) Limited.
On 19 March 2007, Heather Smith started work as a retail pharmacy assistant at Ross Cook Amcal Pharmacy in the Wellington suburb of Stokes Valley. The pharmacy was owned by Stokes Valley Pharmacy (2009) Limited.
The business was sold in 2009, and Ms Smith was offered a job with the new employer (Stokes). She was given a draft agreement on 29 September and that same day she asked certain questions about the draft with Stokes. At this time the trial period was not discussed, because Ms Smith had not noticed it in the agreement.
Ms Smith started work with her new employer on 1 October 2009 and on the following day (2 October) Ms Smith had further discussions with her new employer about the agreement. She then raised her concern about the 90 day trial period, but was told that this clause was included in all agreements, and it was standard.
Reassured about the safety of her position Ms Smith signed the employment agreement on 2 October.
Within a relatively short period of time, the employer became dissatisfied with her performance and on 8 December she was summarily dismissed. Ms Smith then attempted to bring proceedings for unjustified dismissal, and Stokes sought in its defence to rely on the trial period. However, the Court held that the trial period was not valid, and Stokes were not entitled to rely on it.
The Court stated that under the Employment Relations Act, trial periods only apply to “an employee who has not been previously employed by the employer”. Ms Smith had worked for a day and then signed her agreement. At the time of signing the agreement, she was an existing employee and therefore the trial period did not comply with the Act.
Ms Smith was therefore not barred from bringing her personal grievance claim.
Implications
The decision seems harsh, and is a strong indication from the Court that it will not allow employers to rely on trial periods as an easy method of dismissal.
It is a reminder to all employers that it is necessary to comply with all of the requirements of section 67A and 67B of the Act.
These requirements are discussed in greater detail in a previous article entitled “Employment Law Update”. In particular, employers need to ensure that the trial period clause is included in writing in the new employee's employment agreement and that the agreement is signed before the employee starts work.
For further information on trial periods please contact Myriam Mitchell.
Updated: December 2010
