By Edwards Law for On your terms
Feb 2024

It’s a big commitment taking on a new employee, and it can be hard to determine the right candidate from an interview alone.

Now, due to a recent law change, all employers can use trial periods, regardless of how many employees they employ (previously, only employers with less than 20 employees could use a trial period). 

 

What is a trial period?

A trial period is a period of time (max 90 days) that can be included in an employment agreement, during which the employer can dismiss the employee without cause or without following a procedurally fair process.

What requirements must be met for a trial period to be enforceable?

An employer must meet certain requirements to rely on a trial period to dismiss an employee validly.  These include:

  • the trial period must be in writing (eg, in the employment agreement) and must explain that the employer may dismiss the employee, without the employee being able to bring a personal grievance or other legal proceedings in respect of their dismissal, during the period. The length of the period must also be included (max 90 days).
  • the employment agreement must not contain a probationary period clause that runs at the same time as the trial period clause (this will invalidate the trial period)
  • it must be for a specific period (not exceeding 90 days) starting at the beginning of the employee’s employment
  • the employee must be new to the employer. That means if there is an existing employment relationship between the employee and the employer, no matter how long that relationship is, the trial period will not be valid
  • the employee’s offer of employment must contain the trial period. The best way to do this is to attach the proposed employment agreement, including the trial period, to the offer of employment, highlighting the trial period, and
  • the employee must sign and return the employment agreement, including the trial period, before starting work.

Can an employee still bring a personal grievance if dismissed during a trial period?

Where the trial period is valid (ie, meets all the requirements above), the employee is barred from raising a personal grievance for unjustified dismissal.

If the trial period is invalid (ie, doesn’t meet a requirement above), the employee could raise a personal grievance for unjustified dismissal. A dismissal is considered ‘unjustified’ where:

  • the dismissal is ‘substantively unjustified’ (ie, there is not a good reason for the dismissal), and/or
  • the employer has failed to follow a procedurally fair process (eg, has not followed a fair process or given the requisite warnings to, the employee).

On the flipside, an employee can still raise a personal grievance for unjustified disadvantage or any other claims (including discrimination claims) that do not relate to the termination of their employment during a trial period.

Our Individual Employment Agreement includes an option to include a trial period provision. If you are seeking to dismiss an employee under a trial period provision or defending a claim for unjustified dismissal, reach out to our employment law partner, Edwards Law – Employment Law Specialists, for robust advice.

Check out our other blogs Employee vs Contractor - what's the difference? and MUST haves in a New Zealand Employment Agreement. 

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