Notice requirements and 90 day trial periods

An employee dismissed under a contended 90 day trial period has been awarded 12 months’ remuneration and compensation after the employer failed to comply with contractual notice requirements

Mr Roach initially accepted the position of Business Manager with Nazareth Care Charitable Trust Board. Before he started work he accepted a different role of General Manager. Both employment agreements contained a 90 day trial period provision. Mr Roach began work as the General Manager but was summarily dismissed within the 90 day period and was paid in lieu of notice. Mr Roach claimed he was unjustifiably dismissed because the trial period was not valid and the notice given did not comply with his employment agreement.

The validity of the trial period

90 day trial provisions may only be used where an employee has not been ‘previously employed’ by that employer. The definition of ‘employee’ includes a person who has been offered and accepted work as an employee. Mr Roach argued that before he accepted the General Manager position he had been an employee of Nazareth because he been offered and accepted work as the Business Manager. As a result, Mr Roach said that the 90 day trial period in the General Manager agreement was unlawful as he had been previously employed.

The Employment Courtstatedthatameaningof ‘employee’ that is consistent with the purpose of trial periods must be adopted. Therefore, where the Employment Relations Act 2000 refers to an employee that has not been previously employed it means an employee who has not yet performed work for the employer, as the purpose of the trial period is to allow the employee to be assessed while working. Therefore Mr Roach had not been ‘previously employed’ as he had not started working and the 90 day trial period in the General Manager agreement was valid.

This is difficult to reconcile with previous decisions of the Employment Court which have held that where an offer of employment has been accepted a trial period cannot be subsequently imposed as the individual becomes an employee at the point the offer is accepted.

The notice period requirements

Mr Roach was paid in lieu of his one week contractual notice provision which said “The Employer might  decide to pay the Employee not to work.”  Mr Roach  said that ‘notice’ in the Act’s trial period provisions  meant contractual notice, and that the contractual notice provision allowed for a period of paid leave but not for dismissal followed by payment.

As 90 day trial periods remove an employee’s fundamental rights they must be strictly interpreted. The Court held that there were no grounds for summarily dismissing   Mr Roach and that the employment agreement did not allow for payment in lieu of notice. When Nazareth summarily dismissed Mr Roach it did not comply with the employment agreement so it was unable to rely on the valid trial period provision. This opened Nazareth to a claim of unjustified dismissal.

Was Mr Roach’s dismissal justified?

Nazareth dismissed Mr Roach over performance concerns but none of those concerns were discussed with Mr Roach because Nazareth believed it would rely on the protection of the trial period. The deficiencies in the dismissal process were significant and it was found that Nazareth did not act as a fair and reasonable employer. Mr Roach was found to have been unjustifiably dismissed and he was awarded 12 months’ lost remuneration. The Employment Court elected to exercise its discretion to award more than the usual three months lost remuneration on the basis that there was no evidence Mr Roach’s employment was in jeopardy. The Court also awarded compensation for humiliation, loss of dignity and injury to feeling of $25,000.

Similar case

In Ioan v Scott Technology NZ Ltd (trading as Rocklabs) Mr Ioan was dismissed under a 90 day trial period. The employment agreement provided for a four week notice period but said Rocklabs could choose whether Mr Ioan would be required to work through the notice period. After performance concerns were raised, Mr Ioan was told his employment was to end “effective immediately” and the “effective last day of work” was that day. The letter acknowledged the four week notice period and said Mr Ioan would be paid in lieu.

The Employment Court held the employment was validly terminated. Mr Ioan was given four weeks’ notice for which he was not required to work but would be paid. While Mr Ioan’s performance of work was terminated that day, the employment agreement technically continued for a four week period.

The distinction between Roach and Ioan is that Nazareth terminated the employment immediately in  breach  of the contractual notice requirements. In Ioan Rocklabs acknowledged the employment agreement would remain in effect during the notice period.

Take away point

Employers should be especially aware of notice requirements in trial period provisions. Where notice requirements are ambiguous employers should seek advice and consider reviewing the requirements for future agreements. When dismissing employees under a 90 day trial period, employers should ensure they strictly adhere to notice requirements.

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