Payment in lieu of notice Trial Periods – Employment Lawyer – Business Lawyer - Dukesons Business Law

March 2018

This Blog isn't legal advice – if you need legal advice on any business law or commercial law issue, please contact me. I'm an employment lawyer and business lawyer in Auckland who provides advice on a wide range of business law or commercial law issues.

Employment law seems to be the flavour of the month. The Employment Court has given a very important decision affirming that it is permissible to pay out a notice period in relation to a trial period. There was uncertainty about this due to another Employment Court decision.

The employment agreement in issue had a valid trial period clause, which provided for termination on notice, and gave the employer the right to elect not to require the employee to work out the notice period if the employer would pay out the notice period. This was held to be legitimate.

The Chief Judge of the Employment Court had made comments in a previous case that suggested that there was some uncertainty as to whether paying out a notice period would be legitimate. In the present case, the court sought to explain those comments in coming to its conclusion that such a clause is legitimate.

Accordingly, the current law is that in relation to a trial period, provided that notice of termination is given in accordance with the legislation and the relevant employment agreement, the employer can rely on a clause that allows for payment in lieu of the employee working out the Termination notice period or all of it.

An Employment Court decision isn’t of the highest possible authority. This case or any other may fall to be decided by our higher courts. However, until that time, the present case represents the law. My view is that the decision is correct.

Employers should check that the trial period provisions in their employment agreements are worded appropriately to allow payment in lieu of part or all of the notice period. It would also be a good time to have the agreements checked to ensure that they are compliant with all current legislation.

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