Ninety-day trial periods for new employees were first introduced for employers with less than 20 employees in 2009, were extended to cover employers with any number of employees in 2011 and then reverted back to employers with less than 20 employees in 2019.
It appears that between 2011 and 2019, employers with more than 20 employees had become rather fond of their 90-day trial periods, and are still mourning their loss. Whether unwittingly or disingenuously, many larger employers have tried to creatively breathe life back into trial periods, by using probationary periods and fixed-term employment agreements (‘FTA’) in a manner they were not intended for.
So, what is the difference between a trial period, a probationary period and a FTA? Actually, quite a lot.
In summary, a trial period is a period of employment pursuant to s 67A of the Employment Relations Act 2000 (‘Act’), lasting no more than 90 days, for new employees, who have never worked for the employer. The clause must be included in writing in the individual employment agreement (‘IEA’), and the IEA must be signed by the employee, prior to their first day of work.
During this period, an employer may dismiss an employee, and the employee is barred from raising a personal grievance (‘PG’) for unjustified dismissal, although they may still raise PGs for other reasons such as unjustified disadvantage and discrimination. The usual fair procedure set out in s 103A of the Act does not need to be followed.
As stated above, since 2019 the legislation has reverted back to only allowing smaller employers to use trial periods, in recognition that they are more vulnerable to employment law problems than larger companies.
For larger companies, they can still avail themselves of the trial period’s older cousin, the probationary period pursuant to s 67 of the Act, however, an employee can still raise a PG for unjustified dismissal during a probationary period and the fair process set out in s 103A must be followed. In other words, employers still face relatively the same risks and requirements of dismissing someone on a probationary period, as they do with any other employee.
I have had two recent matters which exemplify how employers are trying to get around the restrictive use of trial periods, which if push comes to shove, will not serve them well.
The first is where an employer has dismissed an employee on a probationary period, as if the employee were on a trial period. Dismissals need to be substantively justified (the why) and carried out in a procedurally fair manner (the how). Both the why and the how tests need to be satisfied to justify the dismissal. Simply altering a probationary period to inform an employee in their IEA that they cannot raise a PG for unjustified dismissal during a probationary period, is not going to do the employer any favours. You cannot get someone to sign away their legal rights in an IEA, no matter how much you wish you could.
The other somewhat creative attempt for larger employers to try and resuscitate trial periods, is to put someone on a 90-day FTA pursuant to s 66 of the Act, and if they are not working out, then simply wait for the end of the 90 days, or end the employment relationship early and pay them the remainder of the FTA. If you have paid for any legal advice that has suggested this as a viable option, then you need to sit down with that advisor and have a very serious discussion with them. Now.
FTAs are IEAs that are for a fixed term, but it must be for a genuine reason, such as when Mary gets back from parental leave, or when the bridge you are building has been completed. An FTA must state in the agreement the reason the employment is fixed term, the event that will trigger the ending of the employment relationship and how it will end (such as on two-weeks’ written notice).
Section 66(3) of the Act expressly sets out three examples of what are not considered genuine reasons, which are (a) to exclude or limit the rights of the employee under this Act, (b) to establish the suitability of the employee for permanent employment (Bam! There it is right there!), or (c) to exclude or limit the rights of an employee under the Holidays Act 2003.
So, what options do larger employers have to replace trial periods? To start with there is due diligence at the recruitment end—if an employee’s referee is constantly unavailable or you have doubts about the authenticity (do a Google search and use the phone number listed on a company’s website, rather than the one on a prospective employee’s CV), tell them they need to find another referee.
Also, make sure your onboarding process is robust and that new employees have the training and support they need to succeed. In the current tight labour market, it is easier to recruit and train an employee, rather than to find ingenious ways to get rid of them without a fuss.
