Open-Minded Discussion on Employment Law




Upon the introduction of 90 days trial period provisions into the Employment Relations Act 2000 (section 67A), many employers thought that at last they would have the means to test the suitability of a new employee for a position and if the employment relationship didn't work out, for any reason, then the employment could simply be terminated without any fear of facing a potentially traumatic and expensive personal grievance. But of course, as has now been made clear since Employment Court decided Smith v Stokes Valley Pharmacy [2010] NZEmpC 111, not all was as it may have appeared and there has since been a number of cases in the Court, and the Employment Relations Authority that have reinforced the fact that while trial periods under s.67A of the Act can be useful, employers utilising this tool must take care that well established criteria, such as having the employment agreement signed before the employee commences their employment, is observed.
Four recent determinations from the Authority, all dated 23 August 2016, involving the same employer party, Lighthouse ECE Limited (Lighthouse), and four separate applicants (Baxter, Clark, Du Plooy and Honey), visited the issue of whether the 90 days trial period contained in each of the applicable employment agreements was valid. There appears to be some confusion on the part of the Authority as to the actual clause number of the trial period provision, as in each case it is stated in the determination that the provision appears at clause 9 of the contract, but then the provision is copied into the determination as clause 15. This apparent mistake is compounded by being repeated in each determination but this probably simply reflects some cutting and pasting and lack of proof reading. The trial period provision states that:
(a) A trial period will apply for a period of 90 days under s.67 of the Employment Relations Act 2000 "to assess the suitability of the Employee for the position; and
(b) During the trial period, the Employee and the Employer will deal with each other in good faith. However, the Employer may terminate the employment relationship on one week's notice and the Employee "is not entitled to bring a personal grievance or other legal proceedings in respect of a dismissal".

It is also recorded at page 17 of the employment agreement that: "The commencement date of employment is: 22 November 2015" albeit it seems to be accepted that each employee commenced their employment on 23 November 2015. Therefore, taken at face value, it appears that Lighthouse could reasonably claim to be immune from personal grievance action as they had a trial period provision in their employment agreements that complied with s.67A of the Employment Relations Act which states, or is to the effect, that:
For a specified period (not exceeding 90 days), starting at the beginning of the employees employment, the employee is to serve a trial period. In each case the commencement date, in the agreement, was 22 November 2015 but it appears to have been accepted by all concerned, including the Authority, that the actual date of the "beginning of the employee's employment" was 23 November 2015.

A new interpretation or just a technicality?

At face value, the trial period in the employment agreements appeared to comply with s.67A of the Act, but the Authority disagreed, noting particularly that a commencement of employment date was not included within the trial period clause. But some confusion arises when reading the determinations. On the one hand, the Authority appears to accept a submission for the employer "that the trial period will apply for a period of 90 days under s.67A, starting "on the commencement of employment", but then the Authority did not accept that the respective employees could reasonably be expected to have known this. But surely, the contract means what it says. The language used is quite clear. That is, there is a 90 day trial period starting on 22 November 2015, notwithstanding that the employment started one day later. Nonetheless, the Authority drew attention to the fact that while there there was a date for the commencement of employment included in the contracts, it was recorded in a separate clause from the trial period provision that is found later in the contract. But s.67A does not require a commencement date to be included in the employment contract, it simply states that the 90 days period starts "at the beginning of the employee's employment" which all accepted was 23 November 2016. The submission from counsel for Lighthouse, that to interpret the contract otherwise, would be a technicality, appears to have some merit but the Authority did not accept this. The Authority also appears to rely on hypothetical examples to justify a finding against Lighthouse by referring to a number of circumstances where the parties may agree that the 90 days trial period does not start on the commencement date of employment, but rather when the employee actually starts undertaking the work he or she has been employed to do. Examples referred to by the Authority are: undergoing a lengthy induction, or undertaking offsite training, or secondment to an external entity. Perhaps on some occasions such agreement could arise between the parties to the contract, but that does not appear to have happened in the circumstances of this case. Rather there appears to have been an ordinary commencement of employment, on an agreed date as envisaged by the intent of s.67A.

While the reasoning of the Authority in this particular case is open to debate and it appears that the Authority member was of a mind to establish a new interpretation, it must be accepted that the right to raise and pursue a personal grievance is a legal option that an employee should not be easily deprived of and hence a robust interpretation of the trial period provisions of s.67A of Act is appropriate. It will be interesting to see what follows for the employees now that they have the right to a pursue their personal grievances. There is some hint of a "back story" as three of the four applicants had given written notice of terminating their employment before Lighthouse invoked the trial period clause, hence the question of appropriate remedies could be an important factor as to whether the grievances are economically worth pursuing.