Probationary and Trial Periods

Probationary Periods

Employment agreements may contain provisions relating to a probationary period at the start of employment. However such clauses can be of little practical benefit unless properly set up and administered, because the usual case law rules applying to any dismissal prevail such as the need for good cause and procedural fairness.

In Nelson Air Ltd v NZALPA [1994] 2 ERNZ 665, a pilot was hired on a contract with a probationary period of 6 months.  At the end of that six month period the pilot's employment was terminated on the grounds that he was not suitable for continued employment with Nelson Air.  The Court of Appeal confirmed that:

"Every probationer may be taken to realise that being on trial he or she will be under close and critical assessment and that permanent employment will be assured only if the employer’s standards are met. The Employer for its part may not simply be a critical observer but must be ready to point out shortcomings, to advise about any necessary improvement and to warn of the likely consequences if its expectations are not met.  Because the objective is always that the trial will be a success, not a failure, both parties must contribute to its attainment.  If it becomes apparent to the employer, judging fairly and reasonably, that the trial is not a success, the employee is entitled to fair warning before the end of the probationary period that the employment will then be coming to an end."

The Court held that the employer had failed to treat the employee with the requisite fairness in respect of this probationary period and he was entitled to significant compensation for unjustified dismissal.

Where the parties agree that an employee will serve an initial probationary period that must be specified in writing in the employment agreement (Vape Merchant's employment agreements do not contain such a provision).  Neither the fact that the probation period is specified, nor what is specified in respect of it, affects the application of the law relating to unjustifiable dismissal.

In short, if a probationary period is a critical condition for a particular role you are hiring for, please contact your Regional Manager and Head Office (sue@vapemerchant.nz), to ensure you are clear on what steps need to be taken to ensure Vape Merchant can practically benefit from a probationary period.

Note: Probationary Periods should not be confused with Trial Periods. 

Trial Periods

Any new employee may be subject to a trial period of up to 90 days.

Some see this change as a serious erosion of employee rights.  Others see this as an opportunity for reducing the risks associated with hiring a new employee, while at the same time increasing the possibility of job seekers becoming employed.

To put this in perspective, in Australia the qualifying period during which time an employee can’t bring a case of unlawful dismissal, is 12 months for small employers (those with <15 employees) and six months for larger employers.

But take note that trial periods are no silver bullet as there are many pitfalls for the inexperienced.  The following points should be noted:

• The trial period may only apply to employees who have not previously been employed by the employer. Note: The employee should be asked to sign the agreement one or two days before they are due to start work, because if the employee signs on the first day of work there is a risk that their employment started before they signed the agreement thereby rendering the trial period null and void.
• The maximum period of the trial is 90 days. Note: The agreement must specify the start of the trial period.  The Act provides that the trial must start from “the beginning of the employee’s employment”. It is preferable to specify that the start of the trial period is the day the employee actually commences work, as opposed to the day on which the employment agreement is signed (our appointment letters specify that the start date of the trial is the first day of work).
• The applicant’s agreement to the trial period is required.  The applicant has the right to refuse the offer of a trial period, but in that case the employer does not have to employ the applicant.
• The employee must be afforded a reasonable opportunity to consider the offer and obtain independent advice if they so choose (probably not less than 2 days).
• The trial period must be recorded in a written employment agreement and must specify:
• The period of the trial, being a period not longer than 90 days.  
• That during the trial the employer may dismiss the employee.
• That if the employer does dismiss the employee, he/she is not entitled to bring a personal grievance for unjustified dismissal.

• Any provisions in the agreement relating to review periods or assistance that will be provided by the employer must be honoured.
• There must be good reasons for the employee’s employment to be terminated – ie the decision should not be arbitrary or capricious. This implies that any shortcomings in the employee’s performance must be drawn to their attention before termination is contemplated.
• If the employee is to be terminated they must be given notice, or paid in lieu of notice if the agreement makes such a provision. The notice must be given before or at the end of the trial period but the employee’s employment may end after the expiry date of the trial period.
• Particular care must be taken in sale and purchase situations, because a commitment by the purchaser to offer the vendor’s employees employment on the same terms and conditions may preclude the offer of a trial period.
• At the point of termination the employer is not obliged to advise the employee of the reasons for the termination or provide an opportunity for the employee to comment before the dismissal takes place. However, if the employee asks the reasons he/she is entitled to an explanation at that time.
  
  

Provided the foregoing conditions are met the employee has no grounds to bring a personal grievance for unjustified dismissal. However, that does not prohibit the employee from bringing a personal grievance for unjustified disadvantage or grievances arising from alleged discrimination, sexual and racial harassment and other similar more specific grievances.

Collective Agreements

Where a collective agreement covers the work a new employee will perform, for the first 30 days of employment, the employee’s terms and conditions of employment comprise the terms and conditions in the collective agreement that would bind the employee if the employee were a member of the union; and any additional terms and conditions mutually agreed to by the employee and employer that are no less favourable to the employee than the terms and conditions in the collective agreement.

Therefore, unless the applicable collective agreement makes express provision for trial periods (which is unlikely), any new employee who will perform work covered by the collective agreement may not be subject to a trial period. That is because:

• Where the new employee is a member of the applicable union, the trial period would be inconsistent with the terms and conditions of the collective agreement [section 61(1)(b) ERA].
• Where the new employee is not a member of the applicable union, the trial period would be a less favourable term of employment than the terms and conditions of the collective agreement [section 62(3)(b) ERA].

Generate the agreement or contract you need.