Trial Periods: what is required, and how to safely dismiss

Trial periods are available to all employers for new employees for the first 90 days of employment, and are a helpful tool because they allow employers to dismiss without recourse to a personal grievance claim for unjustified dismissal.

However, there are a number of requirements that must be met in order for the trial period to be safely relied upon to dismiss, and the Courts strictly interpret these requirements because they limit employee rights.

Requirements

  • The employment agreement must include a trial period provision which states:
    -  That the employer may dismiss the employee in the first 90 days of employment; and
    -  In that case, there is no entitlement to bring a personal grievance for unjustified dismissal.
  • We recommend that a trial period clause also provides for a shorter notice period, and for the employee to be required to take garden leave during the notice period (because case law has determined that payment in lieu of notice is not acceptable where employment is terminated during a trial period - notice must actually be given).
  • The employee must be a new employee, and must not have done any work for this employer in the past.  A person that starts work, even just for five minutes, will not be considered a new employee.  Make sure you double check this - it is especially relevant where you are purchasing a business with existing employees when timeframes are often tight and getting employees to sign new agreements is a low priority.
  • A trial period clause must be:
    -  Included in the employee's written employment agreement; and
    -  Signed by the employee prior to their first day of work (even an hour after starting has been held to be too late!).
  • Employees must be told of the trial period when an offer, even a verbal offer, is made.  It is also a good idea to include a sentence in your offer of employment letter that states that the agreement includes a trial period.  When offering an employment agreement, you must also inform the employee that they have the right to seek independent legal advice and give them an opportunity to seek such advice prior to signing the agreement.

Dismissing during a trial period

If you are concerned about an employee's performance or conduct, and their employment is subject to a trial period, we recommend that you first check that you have adhered to the above requirements.  To terminate in reliance on a trial period, you need to prepare a letter for the employee explaining this and giving notice, before the 90 day timeframe has expired.  You should give this letter to them at a meeting where you explain the decision.

Although you don't have to give a reason for dismissing unless you are asked, it is good to be able to point to something if you are.  This is because you are still required to be proactive in your communication with the employee, including telling the employee why you are dismissing them if they ask, even if those reasons wouldn't usually be a justifiable reason for dismissing them without the trial period.

Remember, all other employment obligations apply during the trial period and an employee is not prevented from bringing any other kind of claim, for example, regarding discrimination.

If in doubt, call us for help - the trial period provides a great opportunity for flexibility, but only where used in strict compliance with the legal requirements.