Trials and tribulations

Angeline Long offers some clarity for employers navigating the minefield associated with the 90 day trial period and non-performance.

On 1 March 2009 the government announced an amendment to the Employment Relations Act 2000 relating to the 90 day trial clause. The change extended the provision to all new employees and not only those working for organisations with fewer than 20 employees.
The 90 day trial was seen as a positive move by most employers because it improved market flexibility, increased job opportunities, and indirectly reduced the unemployment rate.  
While not widely embraced by employee groups and unions it has seen employers consider and potentially employ candidates with a lower level of experience and qualifications than they might otherwise have considered.  
Whilst the clause offers protection to employers if they dismiss a new employee within the 90 day trial period it also imposes strict parameters that many employers are unaware of.

The 90 day trial period
The objective of the trial period is to allow an employer to assess a new employee’s performance in a position or role, and for the employee to assess their suitability. At any time during the 90 day trial period the employer can either confirm the appointment or terminate employment by providing one weeks notice. In the event of a dismissal the employee is not entitled to bring a personal grievance or any other legal proceedings in response.
So what are the key elements?  
The 90 day trial provision requires that:
• The employee must not have worked for the employer before.
• The employee must be notified the employment agreement includes a 90 day trial period before they accept the offer – verbally or in writing.
• The employment agreement must include the specific wording prescribed in section 67A of the Employment Relations Act 2000.
• The employment agreement must be signed by both parties or the employer must demonstrate they have made multiple significant attempts to have the agreement signed.
• The notice of termination needs to be given to the employee within the 90 day trial period, even if the final day falls beyond it.

So while the provisions of the Act are clearly defined why are employers finding themselves in hot water with the Employment Relations Authority? Other than those that have simply not satisfied the core requirements, the main reasons are a poorly executed process.  
We’ve seen cases where employees never received a written employment agreement before starting, or where the agreement was never actually signed. We’ve also seen cases where the employee was advised the trial period was being extended beyond the initial 90 days.  
In these cases the employee had sound grounds for a claim of personal grievance.  
Unfortunately that’s not the end of it. We’re now seeing cases where employers have followed the prescribed process and documentation requirements, and still find themselves confronted with a personal grievance.
In a recent case an employee was given a draft employment agreement for review and comment. The agreement included a 90 day trial.  
The employee responded with various comments and questions but at no stage questioned or challenged the 90 day trial period. He signed the agreement initialling all pages including the page mentioning the 90 day trial.
Throughout the employee’s tenure the client monitored and documented performance and had regular meetings to discuss shortfalls in performance against agreed key performance indicators. The employer eventually decided the employee was unable or incapable of completing the tasks required. The employee was given a letter explaining in detail the areas of non-performance and provided with relevant documentation.  Notification of the dismissal was in accordance with the provisions of the 90 day trial clause in the employment agreement.
The employee sought advice from an employment advocate and then submitted a personal grievance. He claimed he had received an email prior to commencement or the signing of the employment agreement that congratulated him on securing the position. While he didn’t respond to the email he argued he had been offered employment without the 90 day provision.
The employee also overlooked the fact the email containing the draft employment agreement clearly stated “the offer was subject to the signing of the attached Letter of Offer and Employment Agreement”. The employee received the agreement in draft and amendments were made based on his feedback before both parties signed it.  
This did not deter the employee from proceeding with a personal grievance and seeking mediation. It was clear during mediation there was no case to answer and the employer chose not to settle. The employee and employment advocate then submitted their case to the Employment Relations Authority.  Faced with further costs of defending their position and unnecessary business distractions the employer reluctantly settled even though they were procedurally and factually correct.  
This is a clear example of how employers can follow the appropriate process and yet still end up defending a personal grievance. The fact many employment advocates work on a no-win-no-fee basis means employees lose nothing by persisting with a case without substance or merit.
Whilst in this case the employer settled, the amount was significantly less than it would have been had they not documented the employee’s performance.

Sign in time
The guidelines around the 90 day trial are very specific and it is important employers are fully aware of the requirements. The employment agreement must be signed before commencement of employment in order for the 90 day trial clause to be enforced. If the employee starts work before signing the agreement the 90 day trial period does not apply. Smith v Stokes Valley Pharmacy is a case in point. In this case the employee verbally accepted the role and then signed the employment agreement on the second day of employment. While the agreement included a 90 day trial provision, the Courts found it could not be enforced.
We always advise clients to ensure they have a robust employment agreement and letter of offer signed by all new employees prior to commencement. The agreement should be sent under cover of a letter or email clearly stating the conditions of the offer – for example, “Subject to your signed agreement to the terms outlined in the attached Employment Agreement, Letter of Offer and Job Description you will be appointed to the role of ………… commencing on ……….”.  
As bizarre and unnatural as it may seem, it is safer not to congratulate a new employee verbally or in writing until the Letter of Offer and Employment Agreement are signed.  
The best way for employers to avoid navigating their way through the minefield of employment law is to ensure they have a robust recruitment process and they gain appropriate advice regarding the employment process.  
There should also be regular performance meetings throughout the 90 day trial period and the proceedings should be clearly documented.