Are you likely to be employing new staff in 2012? And if so, are you considering employing staff on 90 day trial periods? The big advantage with a trial period clause is that it is meant to prevent employees from being able to bring unjustified dismissal claims if the employment is terminated within the first 90 days.
However employers need to be aware of two important decisions from the Employment Court which have made it clear that these “try before you buy” clauses may not provide as much flexibility as first thought.
The first case is Blackmore v Honick Properties Ltd. Honick Properties offered Mr Blackmore a job without providing him with a copy of the proposed employment agreement. Mr Blackmore accepted the job but wasn’t given a copy of his employment agreement until an hour after he had started work on his first day. The agreement contained a 90 day trial period clause which confirmed, among other things, that he could not bring an unjustified dismissal claim if he was dismissed during the trial period. Mr Blackmore signed the agreement. Some weeks later, he was dismissed and (despite the existence of the trial period) filed a claim for unjustified dismissal. The company argued he could not proceed with that claim because of the trial period.
However the Employment Court held that the trial period was invalid because it hadn’t been in place since the commencement of his employment. The Court noted that to be effective, a trial period had to comply with section 67A of the Employment Relations Act. That meant it had to be in place at the start of the employment. Anything after that made it entirely ineffective.
The Court was also critical of what it said was the unfair bargaining which had taken place. Bargaining is “unfair” under the Act where an employee is not given information and/or the opportunity to seek advice on a proposed employment agreement. The Court considered the lack of opportunity given to Mr Blackmore to read, understand and take advice on the agreement (including the trial period) meant the trial period could not be relied upon. As a consequence, Mr Blackmore was entitled to bring a claim of unjustified dismissal.
The case provides a timely reminder that a prospective employee who is offered employment must be:
- provided with their proposed employment agreement well in advance of starting;
- advised of their right to obtain independent advice on the proposed agreement; and
- provided with a reasonable opportunity to obtain the advice.
In practical terms this means giving the prospective employee a copy of the proposed agreement and a reasonable period to consider it and take advice before work is due to commence. It also means ensuring that the company receives back the signed agreement before the employee actually starts work.
The second case of importance is Smith v Stokes Valley Pharmacy. In this decision, the Employment Court once again ruled that an employee dismissed during a 90 day trial, was still able to bring a personal grievance for unjustified dismissal. Although the Court relied on a number of grounds to reach this view, perhaps the most significant was that the Court said that during a trial period, the duty on an employer to act in good faith continued to apply. This included a duty to be open and communicative.
That meant that if an employee wanted to know the reasons for their dismissal during the trial period these needed to be provided. And the Court seemed to leave open the possibility that, if the reasons relied on had not been fully discussed with the employee, the employee could potentially bring a personal grievance for unjustified disadvantage (rather than unjustified dismissal) based on the failure to be open and communicative.
The upshot is employers need to tread carefully when relying on a trial period. Firstly check carefully the trial period was part of an agreement entered into before the employee started work and which was bargained fairly. And if there are issues, openly and honestly discuss these with the employee during the trial, to minimise the risk of a disadvantage claim.