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Employers Beware - 90 day Trial Period

Glen D'Cruz - Solicitor
Glen D'Cruz - Solicitor

Ivan Vodanovich - Associate
Ivan Vodanovich - Associate

ARTICLE by Glen D'Cruz and Ivan Vodanovich

November 2012

Employers beware. If you are thinking of firing one of your employee’s, make sure that you have followed procedure right to the tee by having your employee sign his or her contract on time.

A towing company in Poriua was recently ordered by the Employment Relations Authority (“ERA”) to pay  $11,050 for loss of income and a further $5000 as compensation for humiliation, loss of dignity and injury to feelings for wrongful dismissal even though  the employee Susan Stirling, was fired within 90 days of commencing employment.

The facts of the case are as follows. Ms Stirling commenced work at City Towing NZ on 21 November 2011. An employment agreement between the parties was signed on 23 December 2011. Despite commencing work, the employment agreement remained unsigned until a month later because a number of terms such as Ms Stirling’s role and salary were being negotiated and finalised.

Ms Stirling was hired to assist in the role of dispatch and accounts in relation to the day to day management of City Towing NZ. Sometime in December 2011, she was involved in a verbal altercation with an employee which ended in a particular dispatch going wrong. As a result, City Towing NZ fired her on 21 January 2012. She was dismissed on the spot, and was paid two weeks in lieu of notice.

The employer in this case fired its employee in reliance of the 90 day trial period. The 90 day trial period is a modern day provision in New Zealand which puts the employee on trial in order for the employer to determine the suitability of an employee. The rational of introducing this legislation into the work place is to give businesses increased confidence when hiring new employees. It does this by giving the employer the right to terminate an employee’s contract by the end of the trial period without risking legal action or a personal grievance brought by the employee.

Employers should be aware however, that a trial period has no power when agreed upon orally. In order for one to be valid and legally binding, a contract containing a trial period must be incorporated in a signed written agreement that is executed by both parties. This must occur on or before the employee commences work with the employer. In the interest of acting in good faith, an employer must also give the prospective employee a reasonable amount of time to seek independent legal advice as to the contents of the agreement.

The question then becomes, how can an employer dismiss an employee if a contract is signed after the employee commences work. Ms Stirling’s case teaches us all a lesson in being prudent when executing such labour contracts. According to the ERA in the Stirling case, the 90 day trial period is of no effect if an employee begins work without a signed written agreement. Even if a signed agreement arrived a day later, the 90 day trial period is unavailable because:

1                      the employee had commenced work under a separate set of terms and conditions.( For instance, if an employer sacked an employee who began work on a Monday but signed the contract on a Tuesday, that employee is allowed to bring a personal grievance against its employer if the proper procedure such as a notice period and performance review is not followed correctly in the event of a dismissal. ) and

2                      The ERA considers that the  employee has been previously employed by the employer(Prior to the employment agreement being signed)

In order to avoid such hiccups, employers should make sure never to allow a new employee to commence work unless the following 3 simple rules are followed

-          Get the contract signed by both parties

-          Incorporate the 90 trial period into the contract

-          Allow the employee a reasonable amount of time to seek independent legal advice

An employee who has commenced work without a promptly signed contract should also be mindful that they are entitled to bring a personal grievance against its employer, provided that the employee was dismissed without notice, any performance review or form of warning.          

For more information on employment related matters, especially those consisting of new employees and the 90 trial period, contact Glen D’Cruz