Case Study – When Trial Periods Go Wrong.

Last month we shared our insights into the inclusions of trial or probationary periods, and your obligations surrounding them.

Following on from this, we would like to highlight the potential implications associated with getting it wrong, by looking at a recent case where Canon New Zealand had a personal grievance bought against them due to a defective trial period clause, and failure to give the appropriate notice.

In this instance, Canon advised their employee that his employment was being terminated three days after the completion of his 90 day trial period and that he would receive one weeks’ pay.

While the employment agreement stipulated Canon could terminate employment whilst on a trial period at any time by providing one week’s written notice, or via payout without notice, the Employment Relations Authority (ERA) ruled the trial period clause was defective, as the notice of termination was provided following the 90 day period.

Cannon was therefore in breach of their obligations, as it is stipulated in legislation that notice must be provided before the end of the trial period. If the notice was provided one week prior to the 90 days expiring, the personal grievance could not be raised and no case would be present. In addition, Canon’s employment agreement set out two ways employment could be terminated, one being payment which, in the eyes of the ERA is yet to be clarified.

When ruling, the ERA noted that while the approach may be perceived as “overly pedantic”, they stated they “cannot ameliorate a finding that it failed to comply with its agreed contractual provisions and the legislation”.

While trial periods can be extremely beneficial when acquiring the right people for your business, it is important to ensure you are adhering to all ERA requirements, with some key factors to consider listed below.

1. Check your agreements.

Closely check your employment agreements and the associated 90 day trial periods clause. If it is not exceptionally clear with regard to the amount of notice provided if employment is terminated, you need to amend it so that it is.

2. Create alerts.

We recommend implementing a system, whether it be diary notes or alerts in your payroll software, to remind you of impending trial period expiry dates, allowing you the appropriate time to determine what you would like to do and if required, provide the adequate notice period for termination.

3. Paying out notice.

Essentially, questions are still outstanding with the ERA as to whether you can pay in lieu of notice during a trial period. Until this determination is clarified, we highly recommend employees are placed on garden leave (the employee does not work during the notice period, while still remaining on the payroll) if terminated during a trial period and you do not want the employee working out the notice. Employers must ensure they act fairly and reasonably when enforcing garden leave provisions.

If you have any concerns associated with your employment agreements and associate trail period clauses, contact the Employsure Advisers today to make sure you are meeting all your obligation under the ERA. Call us today on 0800 675 700