Employment Law Update

January 2009

90 Day Trial Periods

The National Government has made it lawful for employers to provide for a 90 day trial period, which provides some flexibility in dismissing employees. 

The changes take effect from 1 March 2009 and if you are wishing to take advantage of the new changes, there are a number of things to be aware of.

Less than 20 Employees

Trial periods only apply to small businesses, with less than 20 employees and take effect from "the beginning of the employee's employment". 

It is unclear at this stage as to exactly who counts as an "employee". The Act provides a broad definition of employees, which includes any person employed to do any work for reward. 

While other provisions in the Act apply only to "a number of full time equivalent employees", there are no such provisions with respect to trial periods. It is also unclear as to how casual workers are to be dealt with, which will be an interesting question. On a strict interpretation, casual workers are engaged afresh on each shift. 

Beginning of an Employee's Employment

A question also arises as to what "the beginning of the employee's employment" means. It is unclear as to whether it means: 

(a) The time when the employment agreement is entered into; 

(b) The time when the employment agreement is signed; or 

(c) When the employee actually begins work. 

This point is important because an employer can only give notice of termination "before the end of the trial period". A trial period can last for a maximum of 90 days, and employers will need to be clear on when the employee's employment begins, and thus when the trial period begins and ends.

Certain Requirements to be in Writing

To take advantage of a trial period, the employee's employment agreement must contain a written trial period provision that covers the following matters: 

(a) The period is for a specified period (not exceeding 90 days) from the beginning of the employment; 

(b) The employer may dismiss the employee during the period; and 

(c) If the employer dismisses an employee, that they are not entitled to bring a personal grievance, or other legal proceedings, in respect of the dismissal. 

We recommend that employers wishing to use trial periods ensure that their company's employment agreements contain well drafted trial period provisions to avoid some of the above pitfalls. Fortune Manning have an Employment Team that is able to assist with the drafting of trial period provisions. 

Probationary Periods - for employers with 20 or more employees

Probationary periods are a separate and distinct tool to trial periods and can be useful for any employer with 20 or more employees. 

Probationary periods allow the employer to monitor an employee's performance and to dismiss an employee if they are not meeting the specified performance objectives. 

Dismissals under a probationary period can still be challenged, but any performance management, or disciplinary procedures under a probationary period can be condensed, making it easier to dismiss an employee. 

Though a probationary period is usually set by reference to time, an employee's satisfactory conduct during that period will entitle the employee to continued employment. 

If the probationary clause and performance management process is well drafted, this can help reduce any risks associated with personal grievances.

For more information please contact Myriam Mitchell.