Another 90-Day Trial Clause Bites the Dust

John Shingleton

Director of Onlinelawyers
www.onlinelawyer.nz

If you ever needed proof the Courts are strict with 90-day trial periods, then look no further than the Employment Court case of Farmer Motor Group Limited v McKenzie, just recently published.

After McKenzie arrived late for work his supervisor told him his employment was immediately terminated under his trial period, and he would be paid out four weeks, in lieu of him working out his notice period.

Sounds reasonable right. Well you are wrong.

Despite the company having a valid 90-day trial period clause, the employment agreement also stipulated that termination required not less than four weeks’ notice in writing.

The ERA decided that because the notice had not been given in writing, the dismissal pursuant to the trial period provisions was not valid. This meant that McKenzie could have his personal grievance heard.

The company challenged this before the Employment Court.

The company argued amongst other things that payment in lieu of notice period meant exactly that. The arguments were rejected by the Employment Court.

The Court decided that payment in lieu of notice is not a substitute for the obligation to give written notice, nor is payment in lieu an alternative to providing notice.

There are some important lessons here.

Firstly: make sure you always issue termination of employment under any 90-day trial clause in writing.

Secondly: if you are going to pay notice instead of requiring the employee to work out their notice period, include that in the letter of termination.

Thirdly: to minimise the financial implications of still getting it wrong, make sure you specify in your 90-day trial clause that if an employment is terminated pursuant to a 90-day trial period, then the notice period will be shorter than written elsewhere in the agreement. Try 24 hours only.

Finally: we know the unions and the Labour party hate trial periods. It will be interesting to see whether this ideological dislike will translate itself into policy. We may also see some changes to other aspects of employment law with the intent of strengthening the power of unions.

So, as you go into your well-earned Christmas break, perhaps it’s a good idea to not only diarise a review of your employment agreement in the new year, but also make a point of keeping an eye out for any proposed labour law changes and how they might affect your business.

Author: magazinestoday

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