The Importance of Drafting a Trial Period Provision Carefully

Kathryn McKinney, Senior Counsel, together with Joy Kaur, Solicitor at Anthony Harper, emphasise the importance of drafting a trial period provision carefully. Kathryn will be speaking at the upcoming Employment Agreements Intensive, together with Maria Green where their presentation will focus on the recent legislative changes affecting employment agreements.

It is extremely important for employers to ensure that all employment documents are compliant and up to date with any changes to the legislation. Non-compliance can have very serious repercussions for companies, including incurring penalties and potentially also damages arising out of a personal grievance. Clear, compliant employment agreements and policies on the other hand, will give an employer protection against these unnecessary costs.  It also helps avoid personal grievances, because clear drafting helps employees understand their entitlements.

A case that highlights the importance of having well drafted employment agreements and complying with the terms is, Ioan v Scott Technology NZ Limited. This case clarified the law on making a payment in lieu of notice upon a 90 day trial period dismissal.

There has for some time been confusion as to whether employers can dismiss an employee under a 90 day trial period clause and pay them out in lieu of working their notice period. There was a risk that in doing so, the trial period dismissal would be deemed invalid, leaving the employer open to a claim for unjustified dismissal.

The Court of Appeal has in June 2019 clarified that an employer can dismiss an employee under the 90 day trial period and pay the employee in lieu of notice period, so long as:

  • Notice was actually given in accordance with the employment agreement and the employment agreement had a provision to pay in lieu of working out the notice period;
  • Notice was clear and unambiguous, and it explained when and how the employment was going to be terminated; and
  • It was clearly stated the employee was not required to work during the notice period and the employee was correctly paid for the full length of the notice period.

In the above mentioned case, the employee’s employment agreement did allow for the employer to pay in lieu of working out notice. The employer gave the correct amount of notice and advised clearly that the employee was not required to work during the notice period and that he would be paid in lieu of working it out. The employer clearly outlined the date the employment ended.

The employer had a correctly drafted employment agreement and then complied with the terms of the agreement, and as a result, the employee was barred from raising an unjustified dismissal claim.

This Court of Appeal decision highlights the importance of having a correctly worded trial period provision.

Kathryn McKinney is involved in both contentious and non-contentious employment work.  She provides advice on the full spectrum of employment law, from employment relations, industrial relations and corporate support, through to Holidays Act compliance and conducting employment investigations.  Kathryn has 20 years’ employment law experience, gained at top-tier firms in New Zealand and the United Kingdom, as well as experience advising in a consulting capacity and in-house.  She is qualified to practise law in England & Wales, Northern Ireland and New Zealand. You may connect with Kathyrn via email

Since finishing her law degree, Joy Kaur has gained experience in immigration law, workplace health and safety, and employment law. Prior to joining Anthony Harper, Joy  advised SME businesses across New Zealand, and gained extensive experience in workplace health and safety, employment law, and dispute resolution. At Anthony Harper Joy advises on a wide range of employment matters including disciplinary processes, investigating bullying, harassment or discrimination complaints, restructures, Holidays Act 2003, Labour Inspector investigations, performance management processes, personal grievances, business sale or acquisition, and restraint of trade. She works closely with clients to advise them on all complex employment law issues and can provide assistance with employment documentation drafting. You may connect with Joy via email