ERA probes validity of trial period waiver in unjustified dismissal case

The Employment Relations Authority (ERA) recently dealt with a case involving a worker who claimed unjustified dismissal from a restaurant café. The dispute centred around the validity of a 90-day trial period waiver and the employer's actions in terminating the worker's employment.

The worker claimed that a waiver had been signed by the general manager, effectively nullifying the 90-day trial period in her employment agreement. Moreover, she said that she was dismissed without any prior warning or explanation, and that performance issues cited after her dismissal were never raised during her employment.

The worker also disputed the calculation of her final pay, including holiday pay and notice period entitlements.

This case serves as a reminder of the importance of following proper procedures when terminating employment, even when a trial period is in place. It highlights the need for clear communication, documentation, and fair processes in all aspects of the employment relationship.

Dispute over trial period waiver

The worker, employed as a kitchen manager from March to June 2023, claimed she was unjustifiably dismissed when the general manager handed her a termination notice and asked her to leave immediately.

The employer argued that they relied on a 90-day trial period clause in the worker's individual employment agreement (IEA) to dismiss her without providing reasons.

The restaurant café was managed by a general manager who was a former employee and took no part in providing evidence. The employer's sole director was the son of the sole shareholder, with these company positions previously held by a senior family member who passed away in 2021.

However, the worker said that the general manager had signed a 'waiver' before the dismissal occurred, effectively nullifying the 90-day trial period. The employer disputed the validity of this waiver, claiming it was signed under false pretenses.

The ERA's investigation revealed conflicting accounts of the waiver's purpose. The worker stated she needed it to show permanent employment for a car loan application, while the employer claimed it was for the worker to bring her cats from Australia.

Authority's findings on waiver

After consideration, the ERA found that the waiver was indeed valid and enforceable. The Authority stated:

"I find that [the employer] through [the manager] agreed to waive what was the remainder of the 90 day trial period that was contained in [the worker's] IEA."

This decision was based on the evidence provided by the worker, as well as the lack of contradictory evidence from the employer.

The ERA emphasised that the worker was entitled to rely on the general manager's authority to sign the waiver.

Is it unjustified dismissal?

The ERA then examined whether the dismissal was justified, given that the 90-day trial period no longer applied. The Authority found that the employer failed to follow a fair and reasonable process in dismissing the worker.

"I am satisfied that none of these things were raised as performance and or disciplinary issues with [the worker] during her employment or before she was dismissed."

This lack of communication and proper process led the ERA to conclude that the dismissal was unjustified. The Authority noted:

"That [the worker] was ousted suddenly without explanation is far from what a fair and reasonable employer could have done."

Compensation and lost wages

As a result of the unjustified dismissal, the ERA awarded the worker compensation and lost wages. The Authority ordered:

"Standing back from the above, I order that [the employer] is to compensate [the worker] $20,000.00 under s 123(1)(c)(i) of the Act for the effect the unjustified dismissal had on her."

Additionally, the worker was awarded lost wages for three months, less the amount she earned during that period.

"Accordingly, [the employer] is to pay [the worker] the difference in the above, which is $5,310.44 gross being an award for earnings lost as a result of the grievance under s 123(1)(b) and 128 of the Act."

The ERA also found that the worker was entitled to additional payment for a notice period and holiday pay that had been incorrectly calculated.

The Authority determined that the worker should have been paid a four-week notice period according to her IEA, but was only paid for two weeks. Consequently, the employer was ordered to pay the shortfall of two weeks' notice period.

Regarding holiday pay, the ERA found that the final holiday payment entitlement at the end of the employment had been underpaid. The Authority calculated the correct amount and ordered the employer to pay the difference.

The ERA awarded the worker $4,500.00 towards her costs in this matter, along with the filing fee of $71.55. This cost award was based on the Authority's usual 'daily tariff' for preparation and appearances on a day investigation.