04/07/2022
The 90 Day trial period: When is the Employment Court likely to find them valid and enforceable?
Section 67A and 67B of the Employment Relations Act 2000 allows employers, with less than 20 employees, to remove a new employee's long held right in NZ to raise a personal grievance for unjustified dismissal, by making the offer of employment conditional on the employee successfully completing a 90 day trial period. Section 67A defines the legal nature and parameters of a trial provision and section 67B denotes the effects or consequences of the existence in law of a valid trial provision.
For a trial period to be enforceable and valid, an employer must meet its legal obligations to the new employee. The employee must be given prior notice of the 90 day trial condition either during the interview or when the verbal or written offer of employment is made (preferably confirmed in writing in an email follow-up), it must be explicitly written in the employment agreement, the employment agreement needs to be provided to the employee 3 to 5 days before commencing work (so that they can seek independent advice on the terms and conditions of employment being offered to them) and the employee must have signed the employment agreement prior to commencing employment (prior to their first day of work).
The Employment Court has strictly applied the application of the section 67A and 67B trial period provisions. This means that an employer wanting to rely on the trial period clause in its employment agreement must have:
1. PRIOR TO EMPLOYMENT COMMENCING
*Not engaged in unfair bargaining for the employment agreement;
*Given the employee prior notice that the offer of employment is conditional on a 90 day trial;
*Ensured the employee received the written employment agreement prior to commencing work with the employer, in enough time for the employee to seek independent advice before he/she/they start work and his/her/their employment commences;
*Received a signed copy of the employment agreement prior to the employee's first day of work, that contains a 90 day trial period clause that clearly starts the day the trial period starts and ends;
2. TERMINATING EMPLOYMENT
*Terminated the employee's employment, and provided the employee with written notice, on or by the last day of the 90day trial period (the employee can still be working out his/her/their notice period after the 90 day trial period has finished);
*Have given the employee their contractual notice (You can pay the employee and not require them to work during the notice period, but you cannot pay them in lieu of giving them notice) and that the notice is given in accordance with any requirements in the applicable notice period provision of the employment agreement(often written notice is required);
*Give the employee a reason why the employee's employment is being terminated, if the employee asks for such an explanation (this is part of the employer's section 4 good faith obligations-excluding the s4(1A)(c) obligations). This is so that the employee is not deprived of the ability to learn from an unsuccessful trial so they can use its lessons in any future employment opportunities. The reason does not have to be given in writing but must not be misleading or deceptive.
In Berea v Best Health Foods Ltd [2020] NZERA 474, the Authority made a determination that has, in part, cut across the body of case law created by the Employment Court. BHF had given Ms Berea prior notice that the offer of employment was conditional upon a 90 day trial and produced proof in the Authority that Ms Berea had accepted employment (in writing in an email and verbally) on the terms and conditions offered in a draft employment agreement, that included a 90 day trial provision. However, Ms Berea commenced employment before signing the employment agreement. The Authority held that Ms Berea and BHF had exchanged emails that showed offer and acceptance of all terms had been completed prior to Ms Berea commencing employment, that she was happy with all the terms being offered (other than a few non essential terms), she intended on signing the employment agreement, and therefore "the later signing of the employment agreement did not create a situation where the trial period is invalidated". Member Beck stated that this finding was consistent with an alternative scenario former Chief Judge Colgan outlined in Blackmore v Honick Properties Ltd [2011] NZEmpC 152, that a trial period could be agreed before employment commences. He also stated that Judge Smith affirmed this proposition in Roach v Nazareth Care Charitable Trust Board [2018] ERNZ 355 at [45]. The Authority departed from the Court of Appeal and the Employment Court's strict approach to employment agreements needing to have been signed by both parties prior to commencement of the employee's employment in order for a trial period to be valid and enforceable. It did so because it held that "the subsequent signing of the agreement made no practical difference to the bargain the parties had already struck. The agreement was inclusive of a trial period that Ms Berea had not objected to". This lead to a promissory estoppel argument, which the Employment Court in Smith Crane Construction Ltd v Hall [2015] NZEmpC 82 at [61] has affirmed is a legitimate action in employment law, because Berea had communicated her acceptance of all terms of employment offered so BHF could have reasonably relied on that promise, it would be to BHF's detriment if that agreement was ignored and arguably it would be unconscionable to rule that BHF should depart from that belief. These two legal issues raised by the Authority in Berea have not been decided by the Employment Court to date.
On 21 and 22 June 2022, Mr Tane defended a claim in the Employment Court that he should be held to an alleged promise to sign his employment agreement prior to commencing work and that the trial period is valid and enforceable, based on this promise and him not having raised any issues about the terms and conditions in a proforma employment agreement he was sent a few weeks before he started work. This case is highly likely to result in a landmark decision from the Employment Court on 90 day trial periods and will clarify the Court's position on the two legal issues raised in Berea v BHF. Watch this space!
