There are also minimum provisions that must be included in an employment agreement.
An employer can be liable for a penalty if they do not meet these requirements.
Individual employment agreements must be in writing and contain such terms and conditions as the employee and employer think fit.
At a minimum, they must include a description of the work, an indication of where the work is to be performed, agreed hours of work, wages or salary and a plain language explanation of the services available for resolution of employment relationship problems.
The employment agreement in question in North Beach included both a 90-day trial provision and a probationary period clause. Ninety-day trial provisions are somewhat controversial. Unions often term these "fire at will" provisions.
The ability to impose a 90-day trial period was first introduced in March 2009. It was originally only available to small businesses with 19 or fewer employees.
The policy was implemented by the National government to encourage hiring by reducing the risks and costs associated with dismissing new employees who might not be a good fit. The provisions are now available to employers of all sizes, no matter how many employees.
The Employment Relations Authority and Employment Court have always interpreted such provisions restrictively. That is because an employee can be dismissed during the 90-day trial period if they are given the necessary notice. The employee does not have the right to bring a personal grievance or legal proceedings in respect of the dismissal.
An employer dismissing an employee under a 90-day trial provision also doesn’t have to comply with good faith obligations when making its decision to dismiss under this provision.
Probationary arrangements are also allowed for in employment agreements. Where there is agreement that an employee will serve a period of probation after starting employment, that must be specified in writing in the employment agreement.
However, unlike 90-day trial provisions, a probationary arrangement does not affect the law relating to unjustifiable dismissal where an employee is dismissed during or at the end of the probationary period.
What this means is that employers seeking to dismiss, because of an unsatisfactory probationary period, need to follow a full, comprehensive, good-faith process.
That involves proposing the dismissal as well as explaining the reasons for the proposal and genuinely considering the employee’s response before making any final decision.
The employment agreement in the case of North Beach, included both a 90-day trial period and a three-month probationary period.
The authority referred to a 2017 Employment Court decision. In that decision, the court found there were inconsistencies between a trial period provision and probationary provision which created ambiguity, rendering the trial period provision unable to be relied upon by the employer.
The court said that was because there were unresolvable conflicts between the two provisions relating to differing notice periods and because, by agreeing to also be bound by the probationary period clause, the employer was required to show justifiable cause for dismissal and undertake a fair process in carrying out the dismissal.
In North Beach, the employer had sent a covering email containing details regarding KiwiSaver and access to North Beach’s systems but did not refer to the trial period or probationary period contained in the employment agreement.
In a separate email sent by North Beach’s automated system, Mr Camacho was provided access to a portal in which he was to enter personal details and review policy documents.
The email stated, "We confirm that your employment is subject to a 90-day trial period, as outlined in your employment agreement. You are welcome to seek independent advice regarding the terms and conditions of your agreement before accepting".
Mr Camacho said nothing in the employment agreement worried him and that although he noticed it contained a trial period and a probationary provision, he was unconcerned by their presence. Mr Camacho did not seek independent advice regarding the employment agreement and regarded it as a formality before commencing work.
The authority, however, found that because the employment agreement asserted that the terms contained in it constituted the entire agreement between the parties, the system-generated email should be given no weight.
While the authority found that the probationary period was a valid part of the employment agreement, it found that the 90-day trial provision was not.
This approach is consistent with the restrictive interpretation which has long been demonstrated by the Employment Relations Authority and Employment Court.
The authority’s view was that the inconsistency between the two provisions rendered reliance on the trial period untenable.
The two clauses in the same agreement created inconsistent rights and obligations for the parties, including differing notice periods and whether a fair process must be followed prior to dismissal.
The authority’s preliminary decision was only about whether the 90-day trial provision was lawful or not.
Having found that it was not, the substantive decision will inevitably result in the dismissal being unjustifiable. That is because North Beach acted in reliance on the 90-day trial provision, believing that it did not have to follow a good-faith dismissal process.
In circumstances where two clauses contradict each other, there is a contrary argument that the 90-day trial provision should take precedent.
However, because the authority and courts view these provisions as removing long-standing employee protections and access to justice, they have been interpreted strictly.
They are seen as an exception to the general employee protective scheme of the Employment Relations Act.
The lesson here is that carefully considered, detailed and comprehensive employment agreements are not only essential to both an employer’s and an employee’s understanding of their relationship, but they are also legal requirements defining the parties’ various rights, obligations and entitlements to justice.
— The opinions expressed in this article are those of the writer and do not purport to be specific legal or professional advice. John Farrow is a partner with Anderson Lloyd, specialising in employment law.
