All in a day's work: The magic number - 90 days?

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A lawful trial period, under the trial period provisions (ss67A and B in the Employment Relations Act 2000 (ERA)) must be for 90 days or less.

The benefit of the trial period provisions is that an employer can hire an employee, include a trial period in the employment agreement (by agreement) and can dismiss the employee within that 90 day period.

If that occurs, the employee has no right or ability to pursue a personal grievance in relation to that termination (an employee may still pursue a personal grievance in relation to discrimination or disadvantage).

Somewhat ironically, 90 days is also the length of time chosen as the statutory period within which an employee can pursue a personal grievance.

In relation to pursuing a personal grievance, the time period runs from either the date of dismissal, or the date the cause of action came to the employee's attention (whichever is the later).

By way of example, it is usually pretty clear the date on which an employee is dismissed if it is for serious misconduct or poor or non performance. It can be less clear to an employee that they may have an actionable personal grievance if the dismissal is in an alleged redundancy situation. That is, the employee may not realise that there are any issues with their employer's actions or process until the employer advertises for a replacement for their role, which may or may not be within the 90 day period.

It is arguably only at that time that the employee becomes aware that they may not have been genuinely made redundant. If it is outside the 90 days since employment ended, the 90 day period may run from when the employee becomes aware of the issue.

The 90 day time period in respect of trial periods was at issue in a recent decision of the Employment Court - Smith v Stokes Valley Pharmacy (2009) Limited.

By way of brief background, Ms Smith was employed by Stokes Valley Pharmacy Limited as a retail pharmacy assistant. The Cooks, who owned the company, advised their employees in 2009 that the business was being sold. The purchasers, Ms King and Mr Kearns, purchased the assets of the business through a new company, Stokes Valley Pharmacy (2009) Limited.

The new company offered Ms Smith a new employment agreement which contained, amongst other things, a trial period provision. Ms Smith received the draft agreement on 29 September 2009. However, what became highly relevant was the fact that Ms Smith commenced employment with the new employer on 1 October 2009, without signing the agreement. Ms Smith ultimately signed the new agreement on 2 October 2009.

An 'employee' to whom a trial period can apply is defined in s67A of the Employment Relations Act 2000 as 'an employee who has not been previously employed by the employer'.

The Court held that when Ms Smith executed her employment agreement on 2 October 2009, as it was her second day of work, she was already an employee and she was not a new employee - one who had not previously been employed by her employer. As a consequence, s67A could not apply to her. The trial period purported to be included in her employment agreement was therefore not in compliance with s67A and the employer could not rely on it.

I must say, I am surprised that this case has not received more attention as the potential impact for employers and employees is huge. The outcome of this case is that it appears that you cannot rely on a trial period where you introduce an employment agreement after the employee has commenced work. Yet amongst clients I deal with regularly, it is very common to get new employees to sign employment agreements after they have started.

Common yes - good practice - no. There is another reason (aside from the impact on trial periods) that this isn't recommended practice; that is because it gives an employer little or no leverage to require the employee to agree to the terms and conditions being offered. The employee is already an employee (as defined in the ERA) and refusing to sign the employment agreement is highly unlikely to constitute grounds for termination.

Instead, as an employer you are more likely left with a situation in which the employee doesn't sign and continues in employment without a signed employment agreement (despite the requirement in s65 of the ERA that there is a written employment agreement).

So, the lessons in all of this: firstly: make sure you get your employees to sign their employment agreements before they commence employment; and secondly, if you want to include a trial period, make sure such a provision is included in the agreement from the outset. Note, at the moment, trial periods can only be used by employers with less than 20 employees. However, the current Bill before Parliament intends to extend that to all employers. Is that a good thing?

What is your experience with trial periods? As an employer, has it made you more or less likely to take a chance on a new employee? As an employee, would you accept an employment agreement that included a trial period? Is there a need for all employers to be able to use trial periods? And - do you get your employees to sign their employment agreements before commencing work?

90 days is currently the magic number. Get it wrong, and let's just say - it will cost you more than 90 dollars!