90-day trial periods are back

Employment | Print Article

March 2024

The Government has fulfilled its commitment to update legislation in relation to 90-day trial periods within its first 100 days. The Employment Relations (Trial Periods) Amendment Bill (Bill) was passed on 21 December 2023, after a fast-tracked process through Parliament.

Following Royal Assent, trial periods are now able to be used by all employers, regardless of the size of their business and the number of employees. This is different to the previous scope, which limited the use of trial periods to businesses with fewer than 20 employees. This means that trial periods will operate as originally intended (for the benefit of all employers, not strictly small businesses) and as originally introduced by National in 2011.

What does this mean for existing employment relationships?

Employers will only be able to dismiss employees under a 90-day trial period, where the employment agreement has a valid trial period provision. All legislative requirements of section 67A(2) of the Employment Relations Act 2000 will need to be met for a dismissal under a trial period to be valid. If a dismissal is valid, an employee will not be entitled to bring a personal grievance or other proceedings against their employer.

The legislative requirements for a 90-day trial period to be enforceable include that the trial provision must be in writing and must be for a specified period (not exceeding 90 days) starting at the beginning of the employee’s employment. It remains unchanged that trial periods will only be able to be entered into if the employee has not previously been employed by the employer. This means that any existing employment relationship, regardless of the length of employment, will not be affected by this change to legislation. An employer cannot introduce a trial period for an existing employee.

The reintroduction of trial periods is a significant change for medium to large sized businesses and their employees, and more changes are expected as the Government continues its term. If you have any questions about including trial periods into your employment agreements or the validity of any trial period provision, please contact your employment lawyer.