Trial Periods and Tribulations—More Unenforceable Trial Period Provisions
Since 1 April 2011, all New Zealand employers have been able to include trial period provisions in new employees’ employment agreements.
Properly implemented, a trial period can stop an employee who is dismissed during their first 90 days of employment from bringing an unjustified dismissal claim. In practice, however, introducing and relying on trial periods has proved more complicated than many expected.
Trial period provisions have been considered by New Zealand’s Employment Court twice. On both occasions, the provisions failed to withstand the Court’s scrutiny. The latest trial period provision to trip and fall at this judicial hurdle was considered in the Employment Court’s November 2011 decision in Blackmore v Honick Properties Limited [2011] NZEmpC 152.
Facts
Mr Blackmore was employed as a farm manager for Honick Properties Limited (“HPL”). On 5 October 2010, he was formally offered employment in a letter setting out the proposed basic terms and conditions. The letter made no reference to a trial period, but said that upon Mr Blackmore’s acceptance of the position, an employment agreement would be filled out reflecting the same basic terms and conditions. Mr Blackmore accepted the offer by email on 10 October.
Mr Blackmore started work at 7 o’clock in the morning of 15 November. Just over an hour later, he was handed an intended employment agreement to sign. New Zealand employers are required by statute to have written employment agreements in place.
Mr Blackmore’s employment agreement included a trial period provision. Mr Blackmore was given the impression that since there was much work to be done, he should sign the agreement there and then, and get on with the job. Mr Blackmore did just that, despite being uncomfortable about the trial period provision.
Around 31 January 2012, HPL told Mr Blackmore that his employment would not be continued after the end of the 90-day trial period. On 6 February, Mr Blackmore was given two weeks’ notice of dismissal. Mr Blackmore then raised a personal grievance.
Issue
The issue for the Employment Court was whether the trial period relied upon by HPL complied with the Employment Relations Act and prevented Mr Blackmore bringing a personal grievance claim arising from his dismissal.
Trial periods can only be used for people who have not been “previously employed” by the employer. For HPL to be able to rely on the trial period, this meant it needed to show that Mr Blackmore was not already one of its employees when he signed the employment agreement containing the trial period provision.
Decision
The Court held that Mr Blackmore became an HPL “employee” in terms of New Zealand legislation on 10 October when he accepted the offer of employment by email. This meant that when he signed the employment agreement on 15 November, he had been “previously employed” by HPL. The trial period was therefore invalid.
Continuing with its strict approach to the validity of trial periods, the Court went on to find that even if Mr Blackmore hadn’t become an employee on 10 October, the trial period would have been invalid because he worked (and so was “previously employed”) for an hour before he signed the employment agreement.
As a third ground for the trial period’s invalidity, the Court found that the trial period provision had been unfairly bargained for by HPL. The company was found to have failed to meet its obligation under New Zealand law to provide Mr Blackmore with a copy of the intended employment agreement, advise him of right to seek independent advice in relation to it, and give him a reasonable opportunity to seek independent advice about it.
Practical Issues
In practice, the Blackmore decision means that:
- Where an employment agreement is to contain a trial period, it must be provided to the prospective employee at the same time as, and as part of, the initial offer of employment.
- A trial period agreed after the employee has accepted employment (even if the offer and acceptance is oral) is unlikely to be enforceable.
- A trial period agreed without the employee having been provided with a copy of the intended agreement, advised of his or her entitlement to seek advice about it, and given a reasonable opportunity to obtain that advice, is also unlikely to be enforceable.
Comment
As noted in an
earlier article, the Court has made it clear that the legislation relating to trial periods will be interpreted “strictly and not liberally”. That approach continues in the Blackmore decision, meaning that successfully institute and rely on trial periods is a somewhat exacting exercise. Until the dust settles, specialist assistance should be obtained.As also previously noted, trial periods are different in law from the similarly-named probationary periods. Both have strict rules as to their introduction and implementation.
Michael Quigg and Tim Sissons, Quigg Partners
