Trial periods and payment in lieu of notice. Employment Lawyer Auckland – Dukesons Business Law

May 2017

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

An important question is whether, assuming that there's a valid or effective trial period clause in an employment agreement, an employer can pay an employee in lieu of giving them notice if the employer wants to terminate the employment during the trial period? There are two conflicting Employment Relations Authority cases.

Section 67B of the Employment Relations Act provides for notice of dismissal but doesn’t refer to payment in lieu of notice. The question is whether this means that payment in lieu is permitted.

The older case says no, and is supported by some non-binding comments in the Employment Court. In broad terms, the main argument for denying a right to pay in lieu of notice seems to be that there must be strict compliance with the provisions of s67B - because it doesn’t refer to payment in lieu of notice, that’s the end of the matter. A valid question is whether the omission was deliberate and if so, what "evil" was thwarted?

The new case says yes (payment in lieu is permitted), but it didn’t refer to the older case or to the comments in the Employment Court. Would the result have been any different had those matters been taken into account?

The risk in making payment in lieu of notice at the present time is that if the older case is ultimately held to be good law, there won’t have been a valid dismissal. That means that the unlucky employer who has relied on what might seem to be a common sense position could be liable for unjustified dismissal.

Until a clear pattern emerges in the Employment Relations Authority or the matter gets to at least the Employment Court for proper consideration, there is uncertainty. Employers who prefer to opt for caution will give notice, rather than seek to pay in lieu of notice.


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