News and Events

The Government passed an amendment to the Employment Relations Act on 12 December 2008.  The amendment will allow small business to use trial periods for any employees engaged after 1 March 2009.

The amendment to the Employment Relations Act 2000 will bring New Zealand in line with other OECD countries (Denmark is currently the only other country that does not allow such trial periods).

Following the change, an employer and employee can enter into an agreement that, for the specified and agreed number of days but for no more than 90 calendar days, the employer can dismiss the employee without the employee being able to take a personal grievance for reasons of unjustified dismissal.  The trial period will apply to employers with 19 or fewer staff.  This number is calculated at the time that the employer and the employee enter into the employment agreement (and will include part time and casual employees but not independent contractors or volunteers).

A trial period is voluntary and must be agreed to in writing in good faith as part of the employment agreement.  The written employment agreement must be signed by both the employee and the employer at the commencement of the employment relationship.  The obligations to bargain in good faith still apply to any proposed trial period.  This includes the employer considering and responding to any issues raised by the employee in respect of any proposed trial period. 

The actual termination of employment need not fall within the period specified in the trial provision; it is enough that the employer has given the employee notice of termination during that period.  It is important to realise that an employer and employee may agree to a trial period only once if the employee has not previously been employed by the employer.  An employer will not be able to include a trial period for an internal promotion or where a former employee returns to the workplace.

The new legislation only protects employers from unjustified dismissal claims.  Employees can still bring personal grievances for unjustified disadvantage, discrimination, sexual or racial harassment, duress and failure by an employer to comply with the continuity of employment provisions in the Employment Relations Act.  It will be interesting to watch developments in this area and see if personal grievances are still raised under the "unjustified disadvantage" umbrella as opposed to the "normal" unjustified dismissal umbrella.

If you propose to include a trial period within your employment agreements, we suggest that you seek legal advice as soon as possible.