Tuesday, 31 May 2011

Trial Periods

Recently I attended some very interesting training on the 90 day employee trial period, which had come into effect on 1 March 2009.

There was an Employment Court judgement earlier in 2011 about a case (Smith vs Stokes Valley Pharmacy (2009) Ltd) which was heard last year. The bald facts of the case are that Ms Smith had been an employee of Stokes Valley Pharmacy since 2007. The original owners sold the business, which was to be effective from 1 October 2009. The new owners made new employment offers to all staff.

Ms Smith was offered a new IEA on 29 September. She took the contract home and read it, and, aside from some other matters that she wanted to negotiate with the new owners about, was also worried about a 90 day trial period clause. Ms Smith did not sign the agreement, but took the contract and her concerns back to the new owners. Ms Smith and Stokes Valley Pharmacy (2009) Ltd had not reached agreement by the take-over date of 1 October, but the new owners asked Ms Smith to start work anyway.

On 2 October, after being told that the 90 day clause was 'standard in all their contracts' and that it wouldn't be a problem, the parties reached agreement and Ms Smith signed the contract.

On 8 December, Ms Smith was dismissed with few reasons given by the new owners. She challenged this through the Employment Court as unjustified dismissal.

Judge Colgan ruled that Ms Smith was unjustifiably disadvantaged, and was unjustifiably dismissed; and that Stokes Valley Pharmacy (2009) Ltd had breached the “good faith” provisions of the Employment Relations Act and the IEA. Additionally, Ms Smith would be able to sue Stokes Valley Pharmacy (2009) Ltd for breach of contract.

The result of this case is that to uphold a 90 day trial period there needs to be:
  • A written employment agreement (there was)
  • The EA as to be signed before employment commences (it wasn't)
  • The employees attention must be drawn to the 90 day clause (no 'reasonable expectation')
  • The 90 day offer should be clarified in an appointment letter (it wasn't)
To avoid a PG for 'Unjustified disadvantage', the employer would be best to clarify acceptable behaviours and provide fair warnings (no 'reasonable expectation'). These do not need to be as extensive or formal as post-trial period, but documentary evidence would protect the employer.

Cautions for employees: if you start work before your written employment contract is signed, the 90 day period may not stand. Ask for a formal appointment letter. If your employer downplays the 90 day period as being 'standard' in your contract, the trial period may not stand. Your employer needs to give you reasonable expectation that your employment will cease if your work continues in the same vein. Ask for regular feedback, and keep diary or file notes of any performance conversations with the employer.

Cautions for employers: don't let any employee start work without having a written, signed IEA already in place, and an appointment letter detailing that the 90 day trial period will be in place, and what that means for the trial employee. Ensure your IEA has been carefully constructed to support the 90 day trial throughout (ie, that all your clauses include reference to the 90 day trial. Get expert employment contract advice with a reputable organisation such as EMA). Keep a diary or file note of any unacceptable behaviours and fair warnings, preferably signed & dated by both parties.

Download a summary of the Smith vs Stokes Valley Pharmacy case from http://www.justice.govt.nz/courts/employment-court/documents/2010-%20NZEmpc%20111%20Smith%20v%20Stokes%20Valley%20Pharmacy%20-2009-%20Limited.pdf.

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