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Ask Our Specialist – Can Every Employee Start on a Trial Period?

Published July 10, 2017 (last updated June 10, 2022) - ANZ Head of Legal Services

Trial period provisions of the Employment Relations Act 2000 have been clarified in a recent case in the Employment Court, Smith v Stokes Valley Pharmacy (2010). The case has provided some important rulings that will impact every business that uses trial periods to manage employees.

Trial periods for new employees

A trial period can only be used for employees new to a particular employer. In a situation where an employee has already begun working for the employer before signing the contract, irrespective of how long this period is, they are considered an existing employee. Having a signed employment agreement in place before the employee starts work is therefore the most effective way to reduce any confusion.

Notice of termination

Despite the employee being on a trial period, the established notice period still applies based on what is outlined in the employment agreement. For example, if the employment agreement says that four week’s notice is required for trial period termination then this is the same notice to be given for termination of the trial period.

Also, a recent determination in the Employment Relations Authority has found that an employer is entitled to pay the employee in lieu of notice when dismissing the employee under the trial period.

Reasons for dismissal

Where an employee has failed the trial period, the employer is obligated out of good faith to outline the reasons for failure ensuring the employee learns from the experience. No employee should be deprived of the ability to learn from an unsuccessful trial. Importantly, employees should not be terminated under the 90 day trial period clause where they had “no inkling that their continued employment was in jeopardy”; again they should be aware of their alleged failings.

What are employer obligations around trial periods?

If the trial period clause in an employment agreement requires employers to provide performance reviews or training to assist the employee, these must be undertaken. A failure to comply with any obligations set out in the trial period clause will make any termination under the trial period an unjustified dismissal with penalties for the employer.

Trial periods are important for employees and employers to determine whether the employee fits the organisation, however there are some common pitfalls business owners encounter. For advice on trial periods, and clauses in employment agreements, contact Employsure on 0800 568 012.

About Employsure

Employsure is one of New Zealand’s largest workplace relations advisers to small and medium businesses, with over 5,000 clients. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

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