Abandon 90-day trial period


Ninety-day trial periods have been a feature of New Zealand employment law since March 1, 2009.  They remain a controversial and hotly debated area of employment law. 

While such clauses may be thought of as a useful tool for employers (including farmers), they can equally be a source of distress to workers who may be particularly vulnerable. Have they really served the purpose they were introduced for? 

When the 90-day trial period policy was introduced, it was intended to:

  • enable employers to determine employee’s suitability for permanent employment, without the risk of legal proceedings for unjustified dismissal; and
  • to create opportunities for those who might suffer disadvantage in the labour market. 

There are always two sides to the fence.  Here are the reasons why we should abandon the 90-day trial period.

There is no direct evidence that 90-day trial periods have led to the creation of new employment.  In fact, since its introduction in 2009, figures published by the Ministry of Business, Innovation & Employment in 2012 reveal that 27% of employers said that they had fired at least one new employee during or at the end of the trial. 

This process is usually without much procedure and can be distressing.

Further, the policy has been ineffective in affording protection to employers against unjustified dismissal claims.  A 90-day trial period clause must be:

  • agreed between the employer and the employee in writing; and
  • be for a specified period (not exceeding 90 days); and
  • must include a statement to the effect that the employer may dismiss the employee during the trial period, in which case the employee cannot bring a personal grievance or other legal proceedings in respect of the dismissal.

The Employment Court has interpreted these requirements strictly, finding non-compliant clauses unenforceable, and therefore the dismissal illegal.  Employers are actually not free from challenge and the burden of legal costs.

Trial periods are often imposed as a standard clause without negotiation in employment agreements and without specific consideration to strict procedures that need to be followed at the offer of employment stage.

Farming employers can be particularly vulnerable where many of the employment relationships can start through informal introductions.  This creates a risk that the employment relationship has commenced before the employment agreement containing the trial period was signed, making the trial period not useful.

For these reasons, the objectives of trial periods (to encourage small and medium enterprises to take on employees, while reducing the cost of employment relationship problems, and providing opportunities for those disadvantaged in the labour market) have not been achieved.  

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 

 

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Philip McCarthy