Employment / Workplace

Trials and Errors

One year on from trial periods becoming available to all employers for new employees, we review two important cases which provide clarification, and some warnings, to employers wishing to use trial periods.

In Smith v Stokes Valley Pharmacy (2009) Limited, the Employment Court held that, among other things, as Ms Smith had worked for one day for the new employer before she signed her employment agreement, she was not a "new employee" when she signed her employment agreement, and the 90‑day trial period contained in her agreement was therefore ineffective. On that basis alone, the Employment Court found that Ms Smith was able to challenge her dismissal.

In Collins Stainless Steel Fabricators, the Employment Relations Authority distinguished that decision Mr Simmons was offered and accepted work as a mechanic, subject to a 90‑day trial period. At the time of the offer, the employer held discussions with him about his rate of pay and the fact that his employment would be subject to a trial period. Mr Simmons agreed to the terms discussed, which were recorded in writing. Two weeks before his first day of work, Mr Simmons was provided with a written offer of employment and the employment agreement. In both of these documents, the inclusion of the 90‑day trial period was highlighted to draw Mr Simmons' attention to it. Despite repeated requests for him to sign and return the agreement, Mr Simmons did not do so until two weeks after he had started work. Mr Simmons was subsequently dismissed during his trial period, and challenged his dismissal on the basis that he was already an employee before he agreed to the trial period, and that it therefore could not be relied on to dismiss.

The Authority held that Mr Simmons fully understood that his employment would be subject to a trial period and that he had received a copy of the agreement prior to commencing his employment. The Authority held that there was nothing in sections 67A and 67B of the ERA 2000 that required an employment agreement to be signed and that it could not have been Parliament's intention to allow an employee to take advantage of a situation where they evaded signing an agreement for whatever reason.

In Blackmore v Honick Properties Limited the Employment Court re-examined trial periods and provided some clarification for employers. In this case, Mr Blackmore accepted an offer of employment over a month prior to his start date. The offer of employment set out the basic terms of employment, but contained no indication of a trial period.

Around an hour into Mr Blackmore's first day of work, Mr Mathis of Honick Properties presented him with an employment agreement to sign, which included a 90‑day trial period. Mr Mathis said there was a lot of work to be done and urged Mr Blackmore to sign the agreement, so that he could get on with the farming work. Mr Blackmore signed the agreement, despite being unhappy about the trial period. Mr Blackmore's employment was then terminated on two weeks' notice in accordance with the trial period. Mr Blackmore raised a personal grievance, challenging his dismissal.

The Employment Court considered whether the trial period in Mr Blackmore's employment agreement prevented him from raising a personal grievance. The Court held that Mr Blackmore became an employee when he first accepted employment, as he was a "person intending to work" and therefore was an "employee" as defined in the Act. Accordingly, the Court said Mr Blackmore had been "previously employed" by Honick Properties when he signed the employment agreement. The Court held that, even if Mr Blackmore was not an employee when he first accepted employment, he had still been employed for an hour, and was therefore "previously employed", when he signed the employment agreement. Accordingly, the trial period was invalid and Mr Blackmore was able to raise a personal grievance.

The Court also found that Honick Properties had bargained unfairly for Mr Blackmore's individual employment agreement by failing to provide him with a copy of the intended agreement "under discussion", failing to advise him that he was entitled to seek independent advice about the agreement, and failing to provide him with reasonable opportunity to seek such advice.

The Employment Court said in summary that employers wishing to utilise trial periods must ensure they are mutually agreed before a prospective employee is employed. The Court said that, in practice, this will require employment agreements to be provided at the same time, and as a part of, the offer of employment. The Court reiterated that an employee must be advised of the right and given a reasonable opportunity to take advice about the terms of employment before there will be a lawful trial period.

Comment

  • The key points for employers arising from these cases are:
  • Trial periods can only be used for employees who have not previously worked for the employer.
  • Employees must be given an employment agreement with the offer of employment and sign their employment agreement before they commence employment.
  • Employees must be advised of the entitlement to seek independent advice and provided with sufficient time to do so.
  • Employees dismissed pursuant to a trial period must be provided with notice of dismissal or payment in lieu of notice.
  • There is no requirement to give reasons for an employee's dismissal during a trial period, but employers are obliged in terms of good faith to provide an explanation (which is not misleading or deceptive), if an employee asks why they have been dismissed at the time of dismissal.

Trial periods should be kept simple - we do not recommend adding unnecessary obligations to be met before an employee can be dismissed.

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The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.

 

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