Could your trial periods land you in trouble?

The 90-day trial period has been part of New Zealand’s employment law since 2009 but many organisations are still grappling to fully understand it – here, one industry lawyer explains how HR can get it right.

“Although it’s been over six years since trial periods were introduced, we’re still seeing many cases coming through where employees are challenging them,” says Sherridan Cook, a partner with Buddle Findlay.

“Part of this is a lack of understanding about how trial periods work but it’s also due to the strict interpretation that the courts generally apply to trial periods because they deny employees the usual rights that they would get if the trial period wasn’t in operation.”

According to Cook, there are a number of different areas where trial periods tend to cause problems for employers.

“Firstly, the clause is not compliant; it’s not actually included in the clause what is required in the legislation,” he tells HRD.

“Secondly, the clause doesn’t precisely define the 90 day period. It might include phrases such as ‘not exceeding 90 days’ or ‘up to 90 days’ which isn’t actually defining precisely how long that period is going to be.”

Cook also says employers are sometimes guilty of failing to comply with their own clauses.

“Sometimes employers will put into the clause that there will be performances requirements or performance management meetings that will take place during the trial period but the employer doesn’t actually have those meetings,” he says.

Another common problem is trial periods being deemed unlawful because they aren’t introduced at the time the offer of employment is made.

“So the employee receives their offer of employment, they accept their offer, and then the employment agreement that contains the trial period is introduced at a later date – but that’s going to be too late,” says Cook.

For employers who want to be certain their trial periods are fair and lawful, there are a number of steps which may make things easier.

“Employers can ensure their trial periods are compliant by firstly understanding what it is that a trial period has to provide for it in order for it to be lawful and then making sure when they draft the clause that they include all of those requirements,” Cook tells HRD.

“Another area is to make sure their recruitment processes are lining up with the trial period.”

While an unlawful trial period may seem low-risk to some, Cook says employers shouldn’t be misled – they actually carry a whole host of serious repercussions.

“The risks faced by a trial period being unlawful are significant and the reason for that is they’re usually challenged after the employee has been dismissed under the trial period,” he says.

“Usually the employer, because they don’t need to, hasn’t actually complied with the usual standards that are applicable when they dismiss an employee – which is having cause for the dismissal like misconduct or poor performance and following certain procedural requirements,” he explains.

“That’s because under the trial period it can’t be challenged so employers will usually just say we’re dismissing you under the trial period and not have any substantive reason for that or have followed a due process.”

As a result, when the trial period is then deemed to be unlawful, the dismissal is most likely going to be unjustified.

“That means the authority or the court is going to award remedies in favour of the employee such as lost wages, damages or compensation for the hurt and humiliation that the employee has suffered, possible legal costs and even reinstatement,” says Cook.

“So it’s going to result in potentially significant financial remedies being awarded against the employer.”