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Employment Law
01 Sep 2010
First Employment Court Decision on 90 Day Trial Period
As many of you will be aware, the Government has recently introduced some proposed amendments to the Employment Relations Act 2000 (ERA). One proposal that has generated significant opposition and media comment from union groups is the extension of the "90 day trial period" to all employers.
Currently only employers with fewer than 20 employees can hire employees on a trial period of up to 90 days. Under sections 67A and 67B of the ERA (which were introduced into the ERA on 1 March 2009) any trial period for new employees must be included in the written employment agreement. The key point is that an employee who is given notice of dismissal before the end of a trial period cannot raise a personal grievance on the grounds of unjustified dismissal. The employee may, however, raise a personal grievance on other grounds such as discrimination.
First Court Decision on 90 Day Trial Periods
Last week the Employment Court delivered its first judgment on the interpretation and application of the 90 day trial period provisions, in the case of Smith v Stokes Valley Pharmacy (2009) Limited.
Heather Smith began work as a retail pharmacy assistant at Ross Cook Amcal in the Wellington suburb of Stokes Valley (owned by Stokes Valley Pharmacy (2009) Limited) on 19 March 2007. In 2009 the business was sold, with the new employer taking over the business on 1 October 2009.
Ms Smith was offered a job with the new employer and she was given a draft employment agreement on 29 September. Ms Smith rang the employer that same day and negotiated certain amendments to the employment agreement. Ms Smith raised some concerns at this time about the 90 day trial period contained in the agreement, but was told this clause was included in all agreements, and was standard.
Ms Smith began working for the new employer on 1 October 2009 and signed the employment agreement, which contained a trial period, on 2 October. Within a relatively short period of time, the employer became dissatisfied with Ms Smith's performance, and on 8 December she was summarily dismissed. Ms Smith then attempted to bring proceedings for unjustified dismissal.
The Employment Court held that the trial period clause in Ms Smith's employment agreement was not valid and that the employer was not entitled to rely on it. The key reason being that when Ms Smith signed and executed the employment agreement on 2 October she was already an "employee" for the purposes of section 67A, albeit for a short period (one day). As Ms Smith was an existing employee, the Court held that the trial period did not comply with section 67A (which only applies to employees who have not been previously employed by the employer), and therefore she was not barred from bringing her personal grievance claim for unjustified dismissal.
Implications
This decision does seem somewhat harsh for the employer, as Ms Smith was provided with the written agreement (including the trial period clause) before she commenced employment. However, she did not sign the agreement until the day after she started work.
It will be interesting to see if Stokes Valley Pharmacy appeals the decision.
The decision is a timely reminder to employers (with fewer than 20 employees) who are considering including a 90 day trial period in their employment agreements, that it is critical to comply with the procedural requirements of sections 67A and 67B of the Act. In particular, employers must ensure that the trial period clause is included in writing in the new employee's employment agreement and that the agreement is signed before the employee commences employment.
Authors
Carl Blake
Senior Associate - Dispute Resolution
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Katherine Burson
Senior Associate - Employment
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Last week the Employment Court delivered its first judgment on the interpretation and application of the 90 day trial period provisions, in the case of Smith v Stokes Valley Pharmacy (2009) Limited.
