The Employment Relations Amendment Act 2018 (“Amendment Act”) was passed into law on 5 December 2018. The Amendment Act makes many changes to the existing Employment Relations Act 2000 (“Act”) regarding employees’ rights in the workplace and collective bargaining rights.
Of particular importance to employers, on 6 May 2019 the Amendment Act makes changes to the 90-day trial period.
90 Day Trial Period
Introduced by the previous government, the 90-day trial period allows an employer to dismiss an employee during the trial period. If dismissed the employee cannot raise a personal grievance claim for unfair dismissal. However, an employee is still able to raise a personal grievance against their employer on other grounds such as discrimination, sexual or racial harassment by the employer. When dismissing an employee under a trial period, the employer does not have to provide reasons for the dismissal nor are they required to follow their standard dismissal procedures.
When this provision was introduced in 2008, only employers with less than 20 employees could use the 90-day trial period provisions for new employees. However, this was expanded in 2010 to cover all employers, regardless of the number of employees.
Employment Relations Amendment Act 2018 Changes
When the second stage of the Amendment Act comes into force, it will amend the Act to only allow employers, with 19 or less employees, use of the 90-day trial period provision.
In essence, it reverts the legislation back to when it was first introduced in 2008.
What effect does this have for employers
From 6 May 2019, any employer who employs 20 people or more will need to review their current employment agreements to ensure that the 90-day trial period is not included when hiring a new employee. If a trial period provision is still in an employment agreement for a new employee after that date the trial period clause will not be valid and is unenforceable. However, if an employee has a trial period clause in their employment agreement and they were hired before 6 May 2018, the employer will be able to dismiss them validly under the trial period, despite the new legislation taking effect.
While employers with 19 employees or less can still retain and use the 90-day trial period in their employment agreements, careful consideration should be given when hiring new employees to ensure that they do not exceed the 19-employee limit if they intend to rely on the trial period provisions.
The Act still allows employers of any size to use probationary periods for new employees. While an employer, at the end of a probationary period, can dismiss an employee, a fair and reasonable process must be undertaken when doing so, otherwise the employer will risk a personal grievance being raised against them.
Regardless of the size of the employer, regular reviews of employment agreements should be undertaken to ensure that the agreement conforms to the current legislation. If there is any uncertainty, then legal advice should be sought.