A 90-day trial period is a provision in an employment agreement that is only available to employers with 19 or fewer employees, that allows an employer to terminate an employee's employment without reason during the first 90 days of their employment. If an employer dismisses an employee during a 90-day trial period, the employee is not entitled to bring a personal grievance against the employer.
The purpose of a 90-day trial period is to allow employers to assess whether a new employee is a good fit for the job. During the trial period, the employer can observe the employee's work performance, attitude, and fit with the company culture. If the employer is not satisfied with the employee's performance during the trial period, they can dismiss the employee without any further consequences.
However, there are a few legal ins-and-outs that need to be discussed, as these often catch employers out and can leave them liable for a personal grievance.
The employment agreement must provide a 90-day trial period
A 90-day trial period will not be able to be enforced if it is not contained within the employment agreement. The Businss.govt.nz website's Employment Agreement Builder provides a great example for a 90-day period clause:
The first 90 days of employment will be a trial period, starting from the first day of work.
During the trial period, the employer may dismiss the employee. Notice must be given within the trial period. Depending on how long the notice period is, the last day of employment may be before, at, or after the end of the trial period.
During the trial period, the employer’s normal notice period doesn't apply. Instead, either the employee or the employer may end this agreement by giving 1 week notice before the trial period ends. The employer might decide to pay the employee not to work. For serious misconduct, the employee may be dismissed without notice.
If dismissed during the trial period, the employee cannot bring a personal grievance or other legal proceedings about the dismissal. They may still bring a personal grievance if they feel the employer has treated them unfairly for other reasons, eg discrimination, harassment or unjustified disadvantage.
During the trial period, the employer and employee must treat each other in good faith.
While each 90-day period clause may be slightly different, the most important parts to include is that the employee is subjected to a 90-day trial period, and as a result, if they are dismissed they cannot bring a personal grievance or other legal proceedings. If a 90-day period cluse is not worded correctly, for example, if it omits the fact that an employee cannot bring a personal grievance, then it may be subject to challenge.
The employee must have agreed to the 90-day period prior to commencing employment
The parties must have agreed on a 90-day trial period prior to commencing employment. While it is preferable that this agreement is shown by way of a signed employment agreement, it is possible for there to be agreement without the signed employment agreement: for example, if an employee were to respond to an email which attached the employment agreement, stating that they explicitly agreed to the terms.
The theory behind this is that there must be unequivocal agreement. An unsigned employment agreement implies that the agreement is still subject to further negotiation and alteration. It is therefore imperative that any employer seeking to include a 90-day period, ensures that the employment agreement is signed and returned prior to the employee commencing employment. If the employee has not signed the employment agreement by the date of proposed commencement, the employer is best to reschedule that commencement date until the agreement is signed. Otherwise, they risk having an ineffective 90-day trial period.
90-day trial periods can't be used for previous or existing employees
The purpose of the 90-day period is to genuinely assess the suitability of an employee. It is only available for new employees, meaning that 90-day trial periods cannot be used for existing employees who have been promoted into a higher role, or for employees who have previously held employment with that employer (for example, on a casual or fixed-term basis).
90-day trial periods don't protect against all claims
It is important to note that a 90-day trial period does not mean that the employee has no rights. The employee is still able to raise any claim that is not connected to the termination of employment The employee can still bring claims relating to minimum wage, breach of employment agreement, breach of the Holidays Act 2003, and so on.
The employee can also bring personal grievances for unjustified disadvantage (for example, for bullying), for sexual harassment, racial harassment, or any of the other personal grievances available under section 103 of the Employment Relations Act 2000.
While 90 day trial provisions are available for small employers to use a part of their hiring practices, it's important to ensure that these are implemented lawfully, otherwise the employer could be subjecting themselves to significant risk of a personal grievance.
If unsure, I recommend seeking legal advice!