Trial provisions (yet again) under review

POSTED BY Duncan Coats
26 September 2016

posted in Caselaw | Employment | Employment Relations Authority | 90 day trial provision

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The outcomes of four separate, but related, claims may cause concern for employers whose standard employment contracts contain trial provision clauses.

Background

The Employment Relations Act 2000 sets out a number of requirements that employers have to meet to ensure that a trial provision clause is enforceable. One of those requirements is that the trial provision clause states (or effectively states) that the employee will serve a trial period (not exceeding 90 days) “starting at the beginning of the employee’s employment”.

If a trial provision is enforceable, an employer can rely on it to dismiss an employee and the employee is then barred from bringing a personal grievance in respect of the dismissal (however an employee is not barred from bringing certain other claims such as unjustified disadvantage or discrimination).

If an employee does not have a valid trial provision clause in their employment contract, or where an employer dismisses an employee after a trial period has expired, it will, broadly speaking, need to have a fair reason and have followed a fair procedure in order for that dismissal to stand a chance of being justified.

What happened in these cases?


Four employees brought claims against their former employer, Lighthouse ECE Limited (Lighthouse). All four employees were dismissed by Lighthouse (purportedly) in reliance on the 90-day trial provision clause that was contained in each of their employment contracts.

However, the relevant clause stated that:

A trial period will apply for a period of ninety (90) days (‘the Trial Period’) under s 67A [of the] Employment Relations Act 2000, to assess and confirm the suitability of the Employee for the position.

Accordingly, the trial provision clause did not state that the trial period started “at the beginning of the employee’s employment”.

What did the Employment Relations Authority (Authority) decide?

The Authority decided that the failure by Lighthouse to specify when the trial period commenced rendered the trial provision clause unenforceable. The Authority did not accept that it is implied that a trial period would start on the first day of each employee’s employment.

This may turn out to be an expensive lesson for the employer. Each employee’s dismissal is almost certainly unjustified because the employer followed a procedure that is not lawful in the absence of an enforceable trial provision (although the full facts surrounding the dismissals are not yet known because these were just preliminary decisions which took place in order to decide whether or not the employees were barred from bringing a claim in the first place).

Comment

The Authority’s decision is a strict one but it is not altogether unsurprising given that previous Authorities and Courts have clearly stated that trial provision clauses will be scrutinised very carefully and applied strictly when employers seek to rely on them (since they deprive employees of the right to lodge certain claims).

Do you need to take any action?

Yes you do. You should review your standard employment contracts and, at the same time, ensure that your current practice for trial period terminations complies with the law.

We would be happy to review your standard employment agreements to ensure, not only that any trial provision clause complies with the law in respect of the matters decided in the cases referred to above, but also in relation to the other requirements that the law specifies. We can also advise you on what you need to know, practically speaking, before terminating employment under a trial provision clause.

Image courtesy of Seth Neilson.

POSTED BY Duncan Coats
26 September 2016

posted in CaselawEmploymentEmployment Relations Authority90 day trial provision

VIEWED 4722 TIMES

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