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The traps hidden within trial periods

Many workers will have commenced their current job on a 90-day trial period. Most small-to-medium employers rely on a trial period when taking on new staff.

90 day trialA great deal of care needs to be taken. Trial periods are intended to encourage employers to take risks on workers they might not otherwise employ. The cost of this job creation is putting the employees in a position of greater vulnerability for up to 90 days. The legislation, the Employment Relations Authority and the Employment Court all understandably take a strict approach to applying this law.

A recent case involving Best Health Foods Limited will help you understand what I mean.

Yi Zhou started work as a full-time accountant with Best Health Foods on 20 January. Within three days he was emailed a letter dismissing him under a purported 90-day trial period. The letter told him he was not required to work further and that he would instead be paid a three-day notice period.

The worker raised a claim for unjustified dismissal by letter to the company on 11 February.

The trial period is only available to employers with fewer than 20 employees. We are not told how many employees Best Health Foods had at the time of Zhou’s brief employment with them, but the company says it is one of the largest OEM milk powder blending and packaging companies in New Zealand. We are not talking about the corner fish and chip shop.

The employer had a bigger problem at the hearing. Zhou pointed out that the employment agreement he signed did not include a trial period clause. Best Health Foods says the trial period clause was omitted by clerical error. This was to no avail. An employee cannot be subject to a trial period that is not included in their employment agreement. The trial period could accordingly not be relied upon.

The employer's fallback position was that Zhou had regardless breached his obligations under the employment agreement. The key benefit to an employer during a valid trial period is that the need to justify a dismissal is removed. The employee cannot raise a personal grievance for unjustified dismissal or otherwise challenge a dismissal under a valid trial period, although they can challenge other areas of the employment relationship. Sexual or racial discrimination and bullying are examples of unacceptable actionable behaviour during the trial period.

Without the trial period, the employer’s fallback argument was never going to get anywhere. The dismissal was unjustified because the worker did not get a hearing prior to his dismissal.

The company also argued that the worker’s poor performance meant that he contributed to the dismissal and any remedy should be reduced accordingly. The Employment Relations Authority carefully analysed these criticisms and was not prepared to find sufficient fault on the worker's part to reduce remedies. The conclusion that Zhou was unjustifiably dismissed was inevitable and the one month’s pay he missed out on while looking for work came to just over $4000. He was awarded that along with $10,000 as compensation for distress. The worker also had some of his costs reimbursed.

Interestingly, this is the second time within four months that Best Health Foods has failed to successfully defend a purported 90-day trial period dismissal.

In the earlier case the authority found the trial period was valid, despite some contention on the point. The employee had not signed the employment agreement before commencing work. Ordinarily this means the trial period is invalid, as a trial period can only apply to a new employee. As soon as an employee starts working, they are no longer considered new. The trial period cannot be entered into after that point.

Here the authority held that there was clear email evidence of agreement to the trial period prior to the employee starting, despite the employment agreement being signed later. Despite this, the dismissal was unjustified because the employer failed to give notice as required under the legislation. Another example of how strictly trial periods are interpreted, both at the point of agreement and at the point they are exercised.

Unfortunately for Best Health Foods, the facts giving rise to the two claims took place within days of each other. They had no opportunity to learn from the first authority decision in order to avoid the second.

This has become a technical area of law. The 90-day trial period provisions are read critically by the employment institutions because of the significant imbalance in power they create. Of course, in an overwhelming majority of cases the employees who have already gathered some skills for the job are kept on. But where they are not, particularly where the worker has been treated harshly, rest assured our employment institutions will look very closely at what happened. This is an area of law where proper professional advice can be invaluable.


Trump acquitted but his divisive approach continues to play out in workplaces

The collateral damage from former United States president Donald Trump’s second impeachment trial and acquittal will continue for some time as news reports from the US make clear.

Trump

The divisive approach of the Trump presidency, aided by social media, resulted in a much more hostile political environment in the US. To a limited extent, perhaps even New Zealand has been affected.

These divisions can play out within the workplace. Examples from both New Zealand and the US point to the wisdom of moderation from both employers and employees alike.

Earlier this year it was reported GitHub in the US dismissed a worker two days after he warned co-workers in Washington to stay safe from Nazis. While it is not certain the exact reason for his dismissal, his employer did believe that the conversation started by the worker was divisive.

The worker told media that the mob that descended on Congress in Washington included people related to neo-Nazi organisations and that he was concerned about the safety of his Jewish family living in Washington. He was also concerned for the safety of his colleagues. He mentioned that some of his family had been killed in the Holocaust.

A backlash against GitHub followed the worker’s dismissal and within 10 days it reversed its position. The company apologised saying it would re-employ the worker and announced that the HR manager who had initially handled the matter had himself resigned.

The apology came after GitHub’s independent investigation found “significant errors of judgment and procedure” concerning the dismissal of the employee.

New Zealand is not immune to extreme political reactions. Only recently Wellington city councillor Rebecca Matthews received a death threat. A member of the public referred to her by a derogatory term on Twitter and allegedly threatened to shoot her.

Matthews complained to police as well as the person’s suspected employer. She also declared she would complain to Netsafe.

Following an internal investigation, insurance broker Aon New Zealand confirmed the threat was made of by one of its employees. It said the person no longer worked for the company. Aon said its culture was one of inclusion diversity and respect. These were core values and there was no place in its team for anyone who exhibited behaviour in conflict with these values.

Both cases show the extremes of political behaviour that seem to be ever more common with the passing of time. Trump certainly stirred people’s emotions. The various forms of social media has meant these extreme statements are given far broader coverage. In both instances it seems people responded quickly and before they exercised judgment preceded by thoughtful reflection.

When expressing strong views, managers and employees should err on the side of caution. Employers are entitled to dismiss an employee whose conduct brings their business into disrepute. Employers will be justified in doing so where they can show they have conducted a fair process and acted as a fair and reasonable employer could.

It is common for people to try to rely on their right to freedom of expression as a shield for their extreme comments. However, the Bill of Rights Act, which enshrines this right, is subject to significant limitations. The act only applies to actions regarding the state, it does not apply to the actions of private enterprises.

The Human Rights Act gives more protection from discrimination against a person for their political opinions. But this protection has been given little consideration in New Zealand, so its exact scope remains unclear.

However, political opinion is unlikely to cloak otherwise bad behaviour. Threatening the life of a city councillor because of their political views is never going to be acceptable and is not an expression of political beliefs.

The moderate expression of political views will normally be protected but harming others will not.


Minimum wage - do you need to work?

Auckland is currently in another Level 3 lockdown. Hopefully this will be confined to the three days currently specified. The extent of the situation in New Plymouth is unclear, but currently the rest of New Zealand is at Level 2.

Level 3 lockdown Papatoetoe

The first Employment Court case relating to employment rights and obligations during the pandemic came through at the end of December last year. Interestingly, the judgment was decided by a majority, not consensus. This illustrates the minefield of rights that employers and employees were dealing with last year during the lockdown.

Should the lockdown continue for an extended period, the judgment provides a reminder that employers need to be mindful of the Minimum Wages Act (the Act) in the event that they need to reduce wage costs.

The Gate Gourmet case

Gate Gourmet provides in-flight catering services to passenger aircraft, both domestically and internationally.

On 23 March 2020 the Government announced the Level 4 lockdown from 26 March 2020. The Director-General of Health subsequently made an order requiring all premises to be closed, unless they came within excepted categories, such as essential services. Gate Gourmet was an essential service and was permitted to stay open for business throughout the lockdown. There still was an expectation that even essential services would restrict their activities to only those that were essential.

The employees in question had employment agreements that provided for full time employment for a minimum 40 hours per week. They were paid the minimum wage.

Following the Level 4 lockdown, Gate Gourmet advised employees and the unions representing them that, as a result of having very little work to offer employees because of the pandemic, it would need to partially shut down operations.

On 26 March 2020, Gate Gourmet proposed to its employees a number of options:

  • Option one – employees take all entitled annual leave until it was exhausted, at which point the employee could move to option two;
  • Option two – it would pay the employees at the rate of at least 80 per cent of their normal pay;
  • Option three – it would pay the employees at the rate of at least 80 per cent of their normal pay, and the employees could then use their annual leave entitlement to supplement their income in order that they receive 100 per cent of their normal pay.

Gate Gourmet confirmed both to its employees and to unions that, if an employee had not been rostered on and had not asked them to come to work, that meant Gate Gourmet had no work for them and they should stay at home. On the same day Gate applied for the Government wage subsidy.

The union rejected option one and agreed to options two and three for its members, subject to Gate Gourmet complying with all applicable legislation.

The law

Section 6 of the Act provides that, subject to certain exceptions, an employee covered by the Act:

“shall be entitled to receive from [their] employer payment for [their] work at not less than that minimum rate”.

Section 7(2) of the Act provides that no deduction in respect of time lost by any employee shall be made from the wages payable to the employee under the Act except for time lost by reason of the default of the employee, or by reason of the employee’s illness or of any accident suffered.

However, the Act does not define “work”. Its meaning has to be ascertained from its context and purpose. This concept has been central to recent cases such as the sleepover cases. These cases are based on whether the employees were working at the relevant times and guided by factors identified by the Courts, namely:

  • the constraints placed on the freedom the employee would otherwise have to do as they please;
  • the nature and extent of responsibilities placed on the employee; and
  • the benefit to the employer of having the employee perform the role

The majority decision found that none of the factors identified applied to the Gate Gourmet employees when they stayed home. It said that accordingly they were not working for the purposes of the Act and no statutory minimum wage entitlements arose.

The minority decision said that the employees could have (genuinely) agreed to temporarily amend their terms and conditions of employment to reduce their hours of work (for example, to 32 hours per week) but could not agree to a reduction in their wages to 80 per cent otherwise it would breach the Act.

Conclusion

It is good to have some clarity from the Court on its interpretation of the Act. It confirms that there a number of “tools” available to employers where employees are ready and willing to work, but the employer simply does not have the work to provide because of external forces such as a lockdown. However, both the majority and minority only addressed the question of the minimum wage legislation. They left the door open for arguments that entitlements arose under the contract in question. It remains prudent for the parties to reach agreement on any changes to the terms of employment.


Should Uber drivers be considered employees?

Since its inception, Uber has disrupted the old taxi-based passenger distribution system. Across the economy there have been similar disruptions of established ways to do things.

 Uber picture1We have all had to reimagine how services are provided and the labour market has been no exception. Independent contractors participating in the gig economy have become only more common and the Government is considering whether they should be given more protections.

In the midst of this government review, the Employment Court has recently considered whether Uber drivers are employees and ought to have all the protections that come with that.

The driver in this case had his relationship with Uber terminated and wanted to pursue a personal grievance. However, only an employee can do so – hence his application to the Employment Court asking it to find that he was really an employee.

The man in question had been an Uber driver for four years and prior to that was a taxi driver. So he knew the industry and he knew what he was getting into. Those wanting to be Uber drivers need certain qualifications such as the appropriate driving licence, insurance, their own vehicle, and they must pass a criminal history check.

Uber did not generally direct or control the driver in the performance of his duties. The agreement he entered into with Uber specifically said the driver was not an employee, and he signed that agreement.

While working for Uber over the years, the driver accepted many passengers and rejected some. He even cancelled some requests for trips which he had earlier accepted.

His access to the Uber app was eventually deactivated by Uber after the company received a complaint from a passenger.

Uber said it investigated the complaint before deactivating him. However, the driver said he had no knowledge of the complaint and was not given any opportunity to comment on it.

The court did not make any findings on this issue. One would expect Uber to investigate a complaint. I think readers would expect the driver to be given a copy of the complaint and a chance to comment on it before the investigation concluded, as a matter of fairness. This certainly would have been the driver’s right if he had been an employee. This lack of protection is a factor driving the call for legislative change.

But the court’s role was quite simple. It had to apply New Zealand law and rely on the definition of employee in the Employment Relations Act to do that.

The court found that the driver was not an employee. He was a contractor. The written agreement said that.

But the written agreement was only part of this finding. There were several other factors which also led the court to find he was not an employee: there was no requirement to display an Uber logo or other signage; the driver could undertake other activities including with competitors of Uber; the driver provided his own tools of trade; he could work whenever he wished and he was not directed or controlled by Uber.

What do you think about what happened? Do you think a driver ought to have been given a hearing before the relationship was terminated? Or is this simply a commercial contract that either party can end on notice like any other commercial contract?

Your views are particularly important right now because the Government is considering these issues as part of its review. When a bill is introduced it will no doubt go to a select committee and that will give the public another chance to have input. In November 2019 the Government published a discussion document called Better protections for contractors.

Feedback has been received and the Government is now in decision-making mode. Eleven different options were presented for comment. One option is to create a category called dependent contractors, and provide this group with some protections. However, I am not sure that would help our Uber driver.

The travelling public seem to like the offer that Uber and other similar service providers make. They use such services a lot.

Many individuals like to provide services as contractors. In the main these arrangements work well. However, there seems to be a limited group of people who have little power and are called contractors perhaps so those paying them can avoid employer obligations.

Many would be protected by our current definition of employee and would have remedies, but some may slip through. It is those people that any change needs to be targeted at.