Beyond the Contract: Navigating the Ins and Outs of 90-Day Trials

On 23 December 2023, The re-introduction of 90-day trial periods allowed all employers to terminate an employment agreement within an employee’s first 90 days, without the risk of a Personal Grievance for Unjustified Dismissal.  These trials were previously reserved for companies with 20 or fewer employees but have been recently reinstated universally in New Zealand.

Sounds straightforward, right? Well… kind of!

As with any employment law update of this significance, there are nuances, special cases and, as always in the HR space, good faith and best practices to be considered. With this in mind, having at least a basic understanding of new dos and don’ts can help shield you and your business from any sort of backlash. The re-introduction of universal 90-day trials increases your flexibility when it comes to employing new staff. So, let’s make sure you get the most out of this change! All you need is the correct implementation.

Let’s break down what you need to know to get the most out of these changes while staying compliant with New Zealand's employment laws:

1.       Contract Signing Period


The employment contract (including the 90-day trial period clause) must be signed before the employee starts work. Specifically, the trial period clause is highly likely to be deemed invalid if the employee’s contract is unsigned, or signed after they have already commenced work. Employers must ensure that every contract is signed in advance, or they risk losing the protections offered by the 90-day trial.

2.       Good faith and process

Just because the changes to the Employment Relations Act remove the ability for a personal grievance or the grounds of unjustified dismissal within the 90-day trial, this does not negate an employer’s obligation to act in good faith. For example, it is still recommended to at least tell the employee why they are being terminated even though, strictly speaking, there is no legal obligation to do so within a 90-day trial period.  With good faith in mind, we strongly recommend that employers seek procedural advice before terminating employees under a 90-day trial, to ensure good faith is maintained.

 

3.       Other grounds for grievances


Similarly, because the changes to the Employment Relations Act remove the ability for a personal grievance on grounds of unjustified dismissal, it does not mean that there aren’t other grounds for a grievance to be raised. To list a few examples, employees are still entitled to raise personal grievances on the grounds of discrimination, sexual harassment, or, as mentioned above, questioning the validity of a 90-day trial. For example, if an employee starts work without a signed contract, they can challenge the legality of the 90-day trial period. Employers should remain aware of these potential risks.

 

4.       Other obligations


Employees have other obligations, such as their notice period which either must be worked out, paid out in lieu, or waived by mutual agreement. Employers should be mindful to acknowledge and follow these obligations. In case of employee dismissal during a 90-day trial period, the employee cannot, for instance, be dismissed effective immediately if they have a notice period of 2 weeks.

Important Nuances

90-day trial employee rights are a topic of ongoing discussion in New Zealand employment law. In a nutshell, the re-introduction of a 90-day trial period has added tools for employers in New Zealand who previously were restricted by their company’s headcount. To access these changes employers must be careful to still be compliant with the legislation. It is crucial to understand that breaching any of the conditions surrounding 90-day trials brings back the grounds for a personal grievance you were trying to avoid!

To summarise what we discussed above, here’s why careful compliance is crucial:

  • A 90-day trial period clause is only valid if the contract is signed before the employee begins work.

  • Employers must still act in good faith and follow fair procedures when terminating an employee, even if they are technically protected by employment law.

  • Employees still retain the right to raise grievances on grounds other than unjustified dismissal, such as discrimination or sexual harassment; 90-day trials don’t just erase this right.

To ensure proper implementation and avoid costly mistakes, we recommend seeking professional HR advice. Don’t let a simple procedural error ruin your experience with the 90-day trial period. Reach out to Core HR today for assistance in navigating these updates in NZ employment law.

 
Francesco Bravi