Many employers seek to rely on a trial period clause in their employment contracts. These clauses provide that an employee will have no right to bring a personal grievance against unfair dismissal if let go within 90 days. One such employer, Smith Crane & Construction Ltd, attempted to terminate Andrew Hall’s employment on this basis. However, the Employment Relations Authority (ERA) has ruled the trial period did not apply in the circumstances and awarded Mr Hall almost $40,000.00 for unfair dismissal.
A number of developers and construction companies operating in Christchurch will anticipate taking on additional staff to cope with rising demand. These companies may wish to take on these additional employees under similar 90 day trials. This decision will put these companies on notice that the 90 day trial period does not give employers free reign and that technicalities around the trial dismissal process must be understood, and abided by.
Smith Crane offered Mr Hall a job via a letter of offer, which attached an employment contract containing a 90 day trial period clause. The letter stated that Mr Hall should counter-sign the offer if he found the terms of the letter and the attached contract acceptable. While Mr Hall signed and returned the offer, he did not sign the attached contract until he had already begun working for Smith Crane.
The ERA found that while counter-signing the offer gave rise to an employment agreement, Mr Hall signed the actual contract containing the 90 day trial period clause at a later date. As the 90 day trial period cannot be imposed on existing employees, the trial period did not apply. As Smith Crane had believed it was entitled to let Mr Hall go under trial conditions, it did not follow the usual stringent process required to properly dismiss an employee, and the ERA gave Hall the significant award of $31,326 in lost remuneration, $7000 for humiliation and $766 reimbursement for variation of work visa costs.
Smith Crane has indicated that it will seek to appeal the decision to the Employment Court. At this stage, the current decision sends a strong message that employment agreements containing a 90 day trial period clause must be signed before the employee commences work, for the clause to have effect.