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employment

Probationary periods vs. 90-day trials

Key Takeaway

Probationary periods are contractual agreements allowing an employer to assess suitability, where employees retain full unjustified dismissal rights. 90-day trial periods, for employers with fewer than 20 staff, can prevent an employee from raising a personal grievance for unjustified dismissal if validly agreed upon in writing before employment begins.

Employment agreements in New Zealand may include provisions for probationary periods or 90-day trial periods. While both are designed to allow an employer to assess a new employee's suitability for a role, they have significant legal differences regarding an employee's rights and an employer's obligations, particularly concerning dismissal.

Probationary Periods

A probationary period is a clause in an employment agreement that allows an employer to assess a new employee's performance and suitability for a role over a defined period. These periods are primarily contractual and can be included in any employment agreement, regardless of the employer's size.

During a probationary period, an employee retains their full rights under the Employment Relations Act 2000, including the right to raise a personal grievance, which is a formal complaint an employee can raise if they believe their employment rights have been breached [Source: Employment Relations Act 2000, s 103]. This means if an employer decides to dismiss an employee during or at the end of a probationary period, the employee can still challenge the dismissal as unjustified dismissal. An unjustified dismissal is a dismissal where a fair and reasonable employer could not have dismissed the employee in all the circumstances at the time the dismissal occurred [Source: Employment Relations Act 2000, s 103A].

For a dismissal during a probationary period to be justified, the employer must generally demonstrate that they had a genuine reason for dismissal (e.g., poor performance or unsuitability) and followed a fair process [Source: Employment Relations Act 2000, s 103A]. The notice period for termination must be as agreed in the employment agreement, or if not specified, it must be reasonable [Source: Employment Relations Act 2000, s 62].

90-Day Trial Periods

A 90-day trial period is a specific statutory provision that, if validly included in an employment agreement, allows certain employers to dismiss a new employee within the first 90 calendar days of employment without the employee being able to raise a personal grievance for unjustified dismissal [Source: Employment Relations Act 2000, s 67A].

Eligibility and Conditions for Validity

Since 23 December 2023, only employers who employ fewer than 20 employees may include a 90-day trial period clause in an employment agreement [Source: Employment Relations Act 2000, s 67A(1)].

For a 90-day trial period to be legally valid and effective, several strict conditions must be met:

  • In Writing: The trial period must be specified in writing in the employment agreement [Source: Employment Relations Act 2000, s 67A(2)(a)].
  • New Employee: The employee must be a new employee who has not previously been employed by the employer [Source: Employment Relations Act 2000, s 67A(2)(b)].
  • Agreement Before Start: The employment agreement, including the trial period clause, must be entered into and signed by both parties before the employee starts work [Source: Employment Relations Act 2000, s 67A(2)(c)].

Employer Rights and Obligations During a Trial Period

If all conditions for a valid 90-day trial period are met, and the employer gives notice of termination during the trial period, the employee cannot bring a personal grievance for unjustified dismissal [Source: Employment Relations Act 2000, s 67B(1)]. The employment relationship will end at the expiry of the notice period, which may extend beyond the 90-day trial period itself [Source: Employment Relations Act 2000, s 67B(2)].

It is important to note that while an employee cannot claim unjustified dismissal under a valid 90-day trial, they retain all other statutory rights. This includes the ability to raise personal grievances for other reasons, such as discrimination, sexual harassment, racial harassment, or unjustified disadvantage [Source: Employment Relations Act 2000, s 103(1)]. Minimum employment entitlements, such as minimum wage, annual leave, public holidays, and health and safety requirements, also continue to apply during a trial period [Source: Employment Relations Act 2000, s 5; Holidays Act 2003, s 16; Health and Safety at Work Act 2015, s 36].

Both parties must also uphold the duty of good faith, an overarching principle in New Zealand employment law requiring employers and employees to be active and constructive in their employment relationship, not to mislead or deceive each other, and to be responsive and communicative [Source: Employment Relations Act 2000, s 4].

Key Differences Between Probationary and 90-Day Trial Periods

Feature Probationary Period 90-Day Trial Period
Employer Eligibility Any size employer Employers with fewer than 20 employees only
Right to Claim Unjustified Dismissal Employee retains full right [Source: ERA 2000, s 103] Employee cannot claim if valid [Source: ERA 2000, s 67B]
Legal Basis Primarily contractual; common law principles Specific statutory provision [Source: ERA 2000, s 67A]
Requirements for Validity Must be in employment agreement Written, new employee, signed before work commences [Source: ERA 2000, s 67A]

Good Faith Obligation

Throughout any employment relationship, including during probationary or trial periods, both the employer and employee have a duty to act in good faith [Source: Employment Relations Act 2000, s 4]. This means they must not mislead or deceive each other and must be responsive and communicative about matters relating to the employment relationship. Failure to act in good faith can lead to a personal grievance claim for unjustified disadvantage.

When to Seek Independent Legal Advice

Navigating the intricacies of employment law can be complex. For specific guidance on employment agreements, probationary clauses, 90-day trial periods, or in situations involving potential disputes or personal grievances, individuals are advised to consult with an employment law specialist, unions, or Community Law Centres for free legal assistance.

Key Resources