90 Day Trial Period

In August this year, an Act Party members’ bill, the Employment Relations (Trial Periods) Amendment Bill (Bill), was drawn from the hat. If passed it will see the 90-trial period restored for businesses with 20 plus employees.
To give background to this Bill, in 2009 the National government introduced a 90-day trial period provision that could be included in an employee’s employment agreement, which allowed the employer to dismiss an employee within the first 90 days, without having to give reason. It was initially introduced as a trial, and then rolled out industry wide in 2011.
Its purpose was to reduce the risk for firms looking to employ new staff, to ‘take a chance’ and test the fit of an employee. It was considered to be of benefit to both parties; particularly where an applicant may not initially fully meet the job requirements, and hence may not have otherwise been hired.
The validity of the trial period has been contested, with concerns being raised that it particularly disadvantages those newly entering the workforce or on low incomes, and that it can be taken advantage of by employers, including exploiting it as 90 days of labour. In 2018, Labour enacted legislation that removed this ‘employer focused’ provision for businesses with 20 or more employees. The intention being to restore ‘fairness and balance in the workplace’, while retaining provision for small business, where it considered the risk to the employer to be more of an issue.
This new Bill would turn back the clock and restore the ability for all businesses to utilise the 90-day trial period. The Bill’s explanatory note states ‘Any risks that are associated with hiring a new employee exist regardless of the number of employees a business has, and the inability of larger businesses to include a 90-day trial period can result in job seekers not being offered employment if risks – perceived or otherwise – outweigh the benefit to the employer.’ And that it is not justifiable that only SMEs can use the 90-day trial period to reduce risk.
In brief, where an employment agreement includes a 90-day trial provision, the employer may dismiss the employee during the trial period (not exceeding 90 days) without having to justify their decision or work through any process, and the employee is not entitled to raise a personal grievance against the employer in respect of the dismissal.
Being an Act party Bill, and with restoring 90-day trial periods for all businesses on National’s 100-day action plan, and in New Zealand First’s manifesto, this legislation could be enacted fairly quickly.