A good illustration of 90 day trial period clauses - Dukesons Business Law - Employment Lawyer - Business Lawyer

January 2021

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

In Beta v Best Health Foods Limited, a recent ERA case, the fact that an employee didn’t sign an EA with a 90 day trial period clause in it until arriving to start work didn’t invalidate the trial period clause. In my view as an employment lawyer, this is good law. However the employer couldn’t rely on the clause because they didn’t use the clause correctly. That’s also good law.

The employer emailed an offer to the prospective employee (B), stating that there would a 90-day trial period. The employer later emailed a draft EA containing a 90-day trial provision and gave B time to read the agreement.

B accepted the offer by email. In addition, the day before starting work, B said that she had read the agreement and was happy with it, except that she wanted another copy with the correct starting date. . The employer said that they would print a copy when B came to start work. B arrived early to start work and after a brief discussion, B and the employer signed the agreement.

On B’s first day, the employer became unhappy with her work. That afternoon, the employer told B they didn’t need her any further. B collected her belongings and left. Later the same day, the employer emailed a letter to B, purporting to give her notice that her employment was to be terminated in 3 days. The letter said the employer would pay her for the 3 days and not require her to work. (The agreement provided that the employment could be terminated with “three days’ notice by either party, or payment in lieu of such notice”.

B claimed the 90-day trial provision wasn’t valid and that she was unjustifiably dismissed.

The ERA found the 90-day trial provision was valid because, before starting work, B:

  • had notice there would be a 90-day trial provision;
  • had time to review the provision in the draft agreement;
  • had agreed to the agreement with the trial period provision in it before starting work.

The bargain between the parties agreeing to a 90-day trial had been struck before B started work. Signing the agreement after B started work made no practical difference. The ERA found the facts could be distinguished from other cases where an employee signed an agreement containing a 90-day trial provision after starting work and the employer hadn’t previously mentioned a 90-day trial.

The ERA held that the employer couldn’t rely on the trial period provision because they didn’t give B notice as required under the agreement. The employer originally gave no notice when terminating B’s employment – it was later that the employer gave notice.

As the 90-day trial provision couldn’t be relied on, the employer was required to show that the dismissal was justified. The ERA found that the dismissal wasn’t justified. The employee was summarily dismissed, in a manner that wasn’t provided for in her agreement. Dismissal could only be justified after giving the employee sufficient time to demonstrate her skill level. The dismissal was abrupt and the employee was given no opportunity for representation or input.

The Authority awarded the employee lost wages and $12,000 compensation for distress, without any reduction for contribution.

There's nothing surprising to an employment lawyer about the case.

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