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New employment law not without inherent risks


THE DOMINION POST - Tuesday 5 April 2011


The Government’s new employment law package was implemented this month. Many employers have already modified their workplace policies and employment agreements to accommodate the changes.

One of the most significant changes is of course the ability of all employers to engage new employees under 90 day trial periods. Since the earlier introduction of the law to employers with under 20 employees, employers have realised that the law is not without its inherent risks.

In a 2009 case an employee named Heather Smith was employed at Stokes Valley Pharmacy. She was engaged in the position of Pharmacy Assistant. Ms Smith started work at the Pharmacy in 2007, but in 2009 the store took on new ownership and Heather was asked to sign a new employment agreement under the new owners.

The new owners sent Heather a new employment agreement on 29 September 2009. Ms Smith said she did not notice that the new agreement contained a 90 day trial period. Before she had signed her agreement the new owners took over the business and began to operate it. They did so from 1 October 2009. Ms Smith signed her agreement after some discussions on 2 October 2009, one day later.

On 8 December 2009, at the Employers request, Ms Smith spent the day at another of the employer’s pharmacies to cover a sick leave absence. At the end of that day the owners together told Heather that she was to be dismissed summarily under her 90 day trial period. When Heather asked what she had done wrong, the response was that she was not what the company was looking for and that she was inexperienced. The owners said they believed that they were entitled to refuse to provide reasons or other explanations.

The Authority said that Heather had suffered economic and emotional consequences because of the dismissal. It said that trial periods must be agreed upon and signed before the commencement of employment, not in retrospect or during the course of the relationship. This did not happen in Heather’s case. She was already working, even if only for a day. The trial period was invalid. The employers also gave Ms Smith shorter notice than she was entitled to, which made the notice ineffective. They also breached their own self-imposed contractual obligations to provide performance assessments and to conduct regular meetings with Heather during the trial period. All in all the Pharmacy failed to act as a fair and reasonable employer.

In a 2010 case Nicole Schneider was employed by BBX Management Limited, now called Barter Management (NZ), in the position of receptionist/office Assistant/Trade co-ordinator. Ms Schneider was enjoying her job in the first few weeks of employment but then became conscious she was being ignored and put down by her seniors. She felt unsupported. A manager acknowledged that Nicole was under pressure and that she should have been given more training.

On 20 March 2009 Ms Schneider completed and returned a performance review. The review was sent to head office in Sydney. On that same day the employer told Nicole that her employment was being terminated. No reason was given but she was simply told that the company “had to let you go”. Immediately after the phonecall Nicole was handed a written dismissal letter personally signed by the company’s Managing Director, who was in Australia at the time.

Nicole’s employment agreement had commenced on 26 January 2009. The 90 day trial periods law only applied to employment agreements entered into after 1 March 2009. This meant that in Nicole’s case the provisions did not apply.

Not withstanding this, the Authority said that the 90 day trial period does not exempt an employer from the duty of providing the opportunity for an employee to be heard when dismissal is contemplated. It stated that this “axiomatic failure” to provide Ms Schneider with an opportunity to state her case prior to any decision being made was fatal to the employer which had also acted in total lack of good faith or fair process. In the words of the Authority, “a classic case of fait accompli”. The dismissal was determined to be unjustified. BBX was ordered to pay $9000 in compensation and 13 weeks pay.


The idea that 90 day trial periods are a failsafe way to get rid of employees within 90 days is a dangerous fallacy. We will no doubt see more cases come about where employers have followed the faulty assumption that they can get rid of whoever they want in whatever fashion they see fit, so long as it is within 90 days. This could end up disadvantaging employees and costing employers a lot in compensation.

It is not just the 90 day trial periods that will affect employers. The new changes include limiting unions’ right to access workplaces. The old position was that essentially unions could enter the workplace to talk to members without prior permission. The new law says that essentially unions must have prior permission before they come onsite.

It will now be harder for unions to be effective by getting access. The element of surprise that previously existed is also now gone. This may have helped unions where they believed the employer was breaching obligations. Unions’ ability to collect dues and the general limitations will somewhat undermine the scheme of union access to workplaces as a whole.

There are also changes to the Holidays Act, the way the Employment Institutions operate, and to the justification for dismissal test that will affect employers. For example, as at 1 April 2011 employees will be entitled to request to ‘cash up’ 1 week of their paid annual leave. They will also be entitled to request to transfer their public holidays to another day. These new entitlements may bring about new company-wide policies. They may just be addressed on a case-by-case basis.

How successful the government’s new laws will be is yet to be seen.

No doubt following 1 April 2011 we will see many ‘test cases’ that deal with these new laws.

Readers will see plenty of action around the new laws, both legal and political. The changes generally represent a shift of power to employers.



Cullen - The Employment Law Firm was one of the first eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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