Avoiding the pitfalls of 90-day trial periods
The ability to hire employees and dismiss them within 90 days without the risk of being taken to court for unjustified dismissal seems straightforward enough.
But employers keep getting it wrong time and time again, experts say.
A 90-day trial period allows an employer to dismiss a worker without risk of having a personal grievance brought forward for unjustified dismissal.
This is for a specified and agreed number of days but no more than 90 calendar days.
It is a common provision and Mark Fisher, founder of Auckland engineering recruitment consultancy Eighty4 Recruitment, says most of his clients use it.
Rather than it giving employers a way to take advantage of people, the trial period gives them the chance to find the most suitable person for the role.
"It's the most effective way of testing whether candidates fit within the company - how they integrate into the role, work within a team, their reliability, skill set and performance," Fisher says.
The three biggest mistakes Fisher sees are:
- Employers not getting paperwork signed by both parties before the worker's start date
- Employers trying to extend the trial period
- Employers are not always aware of the finer legal details. An example is not stating a notice period during the 90-day trial period.
Trial periods can only be for "new" employees, excluding someone who has worked for the same employer in a different role.
This also includes recent employees who did not sign their contract until after they started working.
In April 2015 the Employment Relations Authority (ERA) ruled in favour of a coffee cart worker whose employer, Retro Espresso, dismissed her under the 90-day trial period provision.
The employee, Yanina Mendez, worked for the first 10 days or so without having signed an employment contract, despite repeatedly requesting it.
Both Mendez and her employer eventually signed the contract but two months later, Mendez called in sick on a Friday night.
Retro Espresso owner Brent Gore dismissed her in accordance with the 90-day trial period in her contract after not being able to reach her over the weekend.
The ERA found Mendez was already an employee by the time she signed her contract, so the 90-day trial period did not apply.
She was also not told her poor timekeeping and unreliability might result in her termination and there had been no formal meeting to discuss those issues.
Fisher says employers need to get on top of all the issues and legal details, otherwise it could end up in a long, drawn-out, expensive court case.
In Mendez's case, she was awarded more than $10,000 in compensation.
Duncan Cotterill employment lawyer Jessie Lapthorne says there are a few finer details employers need to understand:
- The trial period must be in a written employment agreement. It is not enough to refer to the trial period in an offer letter and have the employee counter sign the letter.
- The wording of the trial period has to meet all the criteria of the law in terms of explaining the existence and effect of the trial period to the employee.
- Employers who want to terminate a worker's employment under the 90-day trial period must give that staff member notice before the end of the trial period.
- The correct notice must be given as prescribed by the agreement. Generally this requires the employer to set out in writing that the employee's employment is being terminated under the 90-day trial period, and when that notice will take effect.
- The 90-day trial period does not stop a worker from bringing other personal grievances like unjustified disadvantage, sexual harassment and discrimination.
Lapthorne says she also usually advises employers to tell workers about any performance concerns before deciding whether to dismiss them under the 90-day trial period.
"Although there is no obligation to provide these employees with the reason for their dismissal, we normally recommend that employers do so, to avoid employees reaching the conclusion that their employment has been terminated for some other, potentially discriminatory reason, such as because of their race, religion or sex."