Beyond the Contract: Navigating the Ins and Outs of 90-Day Trials

On 23 December 2023, The re-introduction of 90-day trial periods allowed all employers to terminate an employment agreement within an employee’s first 90 days, without the risk of a Personal Grievance for Unjustified Dismissal.  These trials were previously reserved for companies with 20 or fewer employees but have been recently reinstated universally in New Zealand.

Sounds straightforward, right? Well… kind of!

As with any employment law update of this significance, there are nuances, special cases and, as always in the HR space, good faith and best practices to be considered. With this in mind, having at least a basic understanding of new dos and don’ts can help shield you and your business from any sort of backlash. The re-introduction of universal 90-day trials increases your flexibility when it comes to employing new staff. So, let’s make sure you get the most out of this change! All you need is the correct implementation.

Here are the top four things to remember:

1.       Contract Signing Period

The employment contract (including the Trial Period clause) must be signed before the employee’s employment commences. Specifically, the trial period clause is highly likely to be deemed invalid if the employee’s contract is unsigned, or signed after they have already commenced work.

2.       Good faith and process

Just because the changes to the Employment Relations Act remove the ability for a personal grievance or the grounds of unjustified dismissal, this does not mean that obligations of good faith disappear for an employer. For example, it is still recommended to at least tell the employee why they are being terminated even though, strictly speaking, there is no legal obligation to do so within a 90-day trial period.  With good faith in mind, we strongly recommend that employers seek procedural advice before terminating employees under a 90-day trial.

 

3.       Other grounds for grievances

Similarly, because the changes to the Employment Relations Act remove the ability for a personal grievance on grounds of unjustified dismissal, it does not mean that there aren’t other grounds for a grievance to be raised. To list a few examples, employees are still entitled to raise personal grievances on the grounds of discrimination, sexual harassment, or, as mentioned above, questioning the validity of a 90-day trial clause by starting work without a signed contract.

4.       Other obligations

Employees still have other obligations, such as their notice period which either must be worked out, paid out in lieu, or waived by mutual agreement. Employers should be mindful to acknowledge and follow these obligations. In case of employee dismissal during a 90-day trial period, the employee cannot, for instance, be dismissed effective immediately if they have a notice period of 2 weeks.

In a nutshell, the re-introduction of a 90-day trial period has added tools for employers in New Zealand who previously were restricted by their company’s headcount. To access these changes employers must be careful to still be compliant with the legislation. It is crucial to understand that breaching any of the conditions surrounding 90-day trials brings back the grounds for a personal grievance you were trying to avoid!

Don’t let a procedural error ruin your implementation and utilisation of the 90-day trial clauses. Reach out to Core HR today for assistance.