What are 90 Day Trial Periods?

90-day trial periods have been a big topic of conversation in the employment space over the course of this year’s general election. Christopher Luxon, the incoming Prime Minister, has promised to revert the 90-day trial period settings back to their ‘original settings,” removing the changes made under Labour’s leadership. 

What is a 90-day trial period?  

Currently, a 90-day trial period enables small to medium-sized business to include a trial provision in a written employment agreement allowing the business to terminate an employment relationship on a ‘no fault’ basis. A 90-day trial period is only available to businesses that have fewer than 20 employees at the beginning of the day on which the employment agreement is entered into.  

The trial provision must state (Employment Relations Act, s. 67A):  

1. That for a specified period, starting at the beginning of the employee’s employment, the employee is to serve a trial period; and 
2. During that specific period, the business may dismiss the employee; and  
3. If the employee is dismissed, then they are not entitled to bring a personal grievance against the employer in regard to the dismissal.  

If a trial provision does not contain the three conditions, it will be held to be ineffective. A trial provision must also be contained in a written employment agreement, or else it will be considered ineffective.  

Another point to note is that trial periods are only available for new employees, meaning those who have not been previously employed by the employer. In the case of Fagotti v Acme and Co Limited, it was found that an employee, Mr. Fagotti, had worked one eight-hour day before coming on full-time as an employee. Therefore, because the employee was not “new”, the employer was not able to rely on the 90-day trial period clause which was included in Fagotti’s employment agreement. 

It has been established that trial periods must be agreed upon at the beginning of an employment relationship, not retrospectively or during employment. 

What is likely to change under the new National Government?   

National wants to revert 90-day trial periods back to being available for all businesses to utilise—not just those who have fewer than 20 employees. Christopher Luxon believes that it is “a good way for an employer to take on an employee…particularly at a time of record low unemployment and… worker shortages.”  

There are both advantages and disadvantages to 90-day trial periods. The advocates for these periods say that they encourage large businesses to take on new staff and mean that businesses are able to grow and invest more effectively. However, the counter arguments are that trial periods make it easier for businesses to fire people and have the effect of increasing job uncertainty for employees. 

If you require advice regarding 90-day trials or if you believe that you have been unfairly dismissed, please get in touch with the Watermark Employment Law team. We are happy to assist you.  

Note: Information is correct as of the date of publication, November 7, 2023; changes may have occurred after this date.