90-Day Trial Periods: What Employers Need to Know

Tuesday 16 January, 2024

The Government has passed legislation under urgency, making 90-day trial periods available to all employers once again. The previous Labour Government had limited the scheme to businesses with nineteen or fewer employees.

Where an effective trial period provision is in place, a new employee who is dismissed within the first 90 days of employment cannot raise a personal grievance or other legal proceedings in respect of the dismissal.

For a trial period to be effective, some conditions need to be met:

• The trial period provision must meet the technical requirements under the Employment Relations Act 2000, including specifying the date on which the trial period commences and its duration.
• The trial period cannot be longer than 90 days and cannot be extended.
• Only new employees can be subject to a trial period clause. This is strictly interpreted. If an employee signs their employment agreement after they have started work, they are not a new employee and the trial period will not be effective.

Trial periods cannot be included in employment agreements for migrants on Accredited Employer Work Visas.

It should be noted that employers must still act in good faith during the trial period. This includes providing feedback and opportunities for improvement. If an employee is dismissed during a trial period, they can still bring a claim based on breaches of the duty of good faith or other forms of personal grievance such as unjustified disadvantage, sexual harassment and discrimination.

If an employer decides to terminate employment during the trial period, notice or payment in lieu of notice, must be given to the employee prior to the conclusion of the trial period, even if the employee’s last day of employment falls after the conclusion of the trial period. For example, 7 days’ notice of termination can be given on the 89th day, with the final day of employment being the 96th day.

We recommend employers:

• Advise prospective employees in writing (e.g. in a letter of offer) that employment will be subject to a 90-day trial period and where the clause can be found in the employment agreement.
• Explain to the future employee that their employment can be terminated at any time within the trial period, without a reason being provided, and they will not have the ability to bring a personal grievance or other legal proceedings in respect of the dismissal.
• Provide prospective employees with an opportunity to obtain independent advice before signing the employment agreement.
• Make sure the employment agreement is signed and returned before employment commences.

Trial periods can be a useful tool for employers, but only if they are properly implemented. Relying on an improperly implemented 90-day trial provision almost always leads to the dismissal being unjustified.

If you need assistance to prepare an IEA containing a 90-day trial period clause, or you have any questions in relation to trial periods, please contact one of our Employment Law experts below.