Since its inception in 2011, the 90 day trial period has been the source of substantial controversy, interpretation and analysis. Throughout this, a golden thread has emerged whereby the provisions are interpreted strictly and employers must be careful in exercising their rights to dismiss pursuant to the trial period.

This was highlighted recently in the decision of Hutchison v Canon New Zealand Limited where verbal notice of termination given within the 90 day trial period was held to be insufficient when the parties had agreed that written notice must be given.

In that case, Mr Hutchison had signed an employment agreement which included a 90 day trial period. It stated that Canon could terminate his employment at any time during the trial period by giving “one week’s written notice or payment instead of notice”. On the 89th day of his employment, Mr Hutchison was told by Canon that his employment was being terminated pursuant to the 90 day trial period provision because of concerns regarding his performance.

Canon paid out Mr Hutchison’s holiday pay and one week’s notice that same day. However Mr Hutchison’s termination was not confirmed in writing until three days after the trial period had ended.

Mr Hutchison argued that Canon failed to comply with several of the requirements for a lawful trial period and therefore argued that he was not barred from pursuing a personal grievance for unjustified dismissal.

Although there is no requirement under the legislation that notice be given in writing, the Employment Relations Authority in this case found that Canon had not satisfied its contractual obligation to provide written notice before the end of the trial period. Put another way, Canon had not complied with the terms of the employment agreement. It did not matter that Mr Hutchison had been given verbal notice before the end of the trial period.

The Authority found that Mr Hutchison was therefore entitled to bring a claim of unjustified dismissal.

Another recent case also highlights the difficulties with relying on trial periods to dismiss. In Hall v Smith Crane & Construction Limited the employee, Mr Hall, had signed an offer of employment letter before starting work but did not sign the employment agreement enclosed with the offer letter until after starting work. The employment agreement contained a 90 day trial provision. The Authority held that Mr Hall was not a “new” employee at the time he signed the employment agreement so the trial period was not valid and the employer was not entitled to rely on it in dismissing him where there were concerns about his competence. Mr Hall was awarded $31,326 in lost remuneration and $7,000 in compensation for hurt, humiliation and distress.

These decisions reinforce the message that employers should be extremely careful when attempting to terminate an agreement under a trial period provision. While the 90 day trial period provisions are intended to provide employers with increased flexibility, there strict rules which govern the process.

Briefly, the requirements for a lawful trial period are that:

  • It is contained within a written employment agreement;
  • It is signed by the employee before any work commences;
  • It must comply strictly with the Employment Relations Act 2000; and
  • An employer must comply with the terms of the employment agreement.

If those requirements are met then the employee may not bring a personal grievance or legal proceedings in respect of any dismissal pursuant to the trial period. However, other claims can still be raised such as unjustified disadvantage and breach of the duty of good faith.

We encourage employers to check the wording of their trial period provision and seek advice before dismissing an employee pursuant to a trial period.