The 90-Day Trial Period and Restructuring in New Zealand: What Employers Need to Know

The 90-day trial period under section 67A of the Employment Relations Act 2000 allows employers to dismiss a new employee during the first 90 days of employment without that employee being able to raise a personal grievance for unjustified dismissal. It is a significant protection for employers, but one with strict requirements, a hard time limit, and a complex interaction with the ERA 2000's restructure obligations.

What happens when a new employee's role becomes genuinely redundant during their trial period? Or when an employer wants to exit a trial period employee using redundancy language but the role is not genuinely being disestablished? These situations come up more often than expected, and the stakes of getting them wrong are high.

What the Trial Period Clause Actually Does

Under section 67A of the ERA 2000, an employer and a new employee can agree in writing to a trial period of up to 90 days. If the employer dismisses the employee during the trial period:

The employee cannot raise a personal grievance for unjustified dismissal

Other personal grievance grounds still apply: discrimination (including on the grounds of age, sex, race, disability, and other characteristics under the Human Rights Act 1993), harassment, breach of good faith in the employment relationship (other than unjustified dismissal), and actions related to union membership or a previous personal grievance history remain fully available

The employer must give written notice of dismissal before the trial period expires: the notice must be served while the period is still active

The employer must give the notice period specified in the employment agreement (the dismissal takes effect at the end of the notice period, which may extend beyond the 90-day mark; this is expressly permitted by the Act)

The trial period clause must be valid for these protections to apply.

Validity Requirements

A trial period clause is only valid if:

It was included in the written employment agreement before the employee started work. A clause added on day 1 (when work has already commenced), signed after the employee starts, or attached to an agreement that pre-dates the employee's employment with the employer is not valid.

The employee is a new employee. Someone who has previously worked for the employer, even in a different role or many years ago, cannot be subject to a new trial period.

The period is no longer than 90 days and is clearly specified in the agreement.

The clause is unambiguous. Courts have struck out trial period clauses that were poorly drafted or unclear about the dismissal mechanism.

If any of these requirements are not met, the trial period clause has no effect and the employee has the same unjustified dismissal rights as any other employee.

Two Pathways: Genuine Redundancy vs Trial Period Dismissal

When ending employment during a trial period, the employer faces two distinct situations with different legal requirements.

Situation 1: Genuine Redundancy

The role is genuinely no longer required, regardless of who is in it. The restructure is driven by a real commercial, operational, or structural reason, and the role would be disestablished whether the incumbent had been there for three months or three years.

In this situation, you must follow the full ERA 2000 consultation process.

The trial period clause provides no shortcut through the good faith consultation obligation. Section 4(1A) of the ERA 2000 requires:

A written proposal issued to the affected employee before any decision is made

A genuine consultation period with a real opportunity to respond

Active, genuine consideration of the employee's feedback

Active consideration of redeployment opportunities

A written final decision

Skipping any of these steps, even though the employee is within their trial period, is a breach of the good faith obligation under section 4. While the employee cannot raise a personal grievance for unjustified dismissal during the trial period, they can still raise a personal grievance based on breach of good faith. The ERA has made clear that the trial period exemption operates narrowly: it removes the unjustified dismissal ground, but it does not suspend the employer's substantive obligations under the ERA 2000.

In practice, this means proceeding via genuine redundancy during a trial period is almost as procedurally demanding as proceeding via genuine redundancy at any other time.

Situation 2: Trial Period Dismissal

The employer wishes to end the employment during the trial period because the employee is not meeting expectations, there is a fit or conduct issue, or there are other performance-related concerns. The role itself is not being disestablished. It will continue and a replacement will be sought.

In this situation, use the trial period dismissal pathway under section 67A.

The requirements are straightforward:

Give written notice of dismissal before the trial period expires

Give the notice period specified in the employment agreement (the dismissal takes effect at the end of the notice period)

Confirm the reason for the dismissal in writing (this is not strictly required by the Act but is required by the duty to be responsive and communicative under section 4 of the ERA 2000)

No formal consultation process is required for the decision itself. The employee cannot raise a personal grievance for unjustified dismissal if these requirements are met.

Note: some collective agreements do not permit trial periods for employees covered by the CA. Check the relevant collective agreement before relying on a trial period clause for any union member.

The Critical Timing Risk

The most common mistake when restructuring during a trial period is starting a consultation process that runs past the 90-day expiry.

This is how it happens: an employer initiates a genuine restructure while a new employee is 75 days into their trial period. A proper consultation process under the ERA 2000 requires at minimum 10–15 working days for a straightforward role. The trial period expires before the consultation is complete. By the time the final decision is issued, the trial period has expired.

Once the trial period expires, the employee has full unjustified dismissal protection. If the redundancy decision is communicated after the trial period expires, the employee can raise a personal grievance for unjustified dismissal, and the employer must demonstrate that the full ERA 2000 process was followed.

The trial period does not freeze the consultation clock. Starting a genuine consultation process within the trial period does not preserve trial period rights if the dismissal occurs after the period has expired.

Practical Implication

If a restructure will affect employees still within their trial period, the employer faces two choices:

Complete the full consultation process and issue the final decision within the 90-day period. This requires an accelerated timeline covering proposal, consultation, and final decision all within the remaining days. An accelerated timeline that is later found to have been inadequate because it was rushed creates its own procedural risk.

Allow the trial period to expire and proceed with a normal ERA 2000 consultation process. The employee gains full unjustified dismissal rights, but the process is run properly without time pressure.

In most cases, option 2 is lower risk. A properly run consultation process after the trial period expires is more defensible than a rushed process that happened to land within the trial period.

When "Redundancy" Is Used as a Pretext

The ERA is alert to employers using "redundancy" language to exit trial period employees they want to remove for non-redundancy reasons. If the employer:

Decides to remove a specific trial period employee and then constructs a business rationale to support "redundancy"

Recruits for the same or substantially similar role shortly after the "redundancy"

Treats trial period employees differently from longer-serving employees in the same roles during the same restructure

The ERA may find that the redundancy was not genuine, that the employer chose the redundancy pathway to avoid scrutiny of a trial period dismissal, but then failed to follow the redundancy pathway properly. This can result in a finding of unjustified dismissal for an action taken during the trial period, because the employer's own choice of pathway invited full scrutiny of the redundancy process.

The safest position: if the issue is genuinely about the role, use the redundancy pathway and follow it properly. If the issue is genuinely about the person, use the trial period pathway and follow it properly. Never attempt to achieve the outcome of one by going through the motions of the other.

Redeployment Obligations During the Trial Period

Where the dismissal is on genuine redundancy grounds, the redeployment obligation applies regardless of the employee's trial period status. Before confirming a redundancy, the employer must:

Search across the organisation for suitable alternative roles

Notify the affected employee of identified vacancies

Genuinely assess whether the employee can perform the role with reasonable upskilling

Document the search and its outcome

The trial period protection removes the unjustified dismissal ground. It does not remove the obligation to genuinely consider alternatives to dismissal.

Common Mistakes

Using the wrong pathway. Announcing "your role is redundant" when the actual intent is to end a trial period that isn't working out is the most common and costliest mistake. It invites ERA scrutiny of a redundancy process that was never run properly.

Not checking whether the trial period is still active. Before taking any action, confirm the exact start date of employment and the expiry date of the trial period. A trial period that expired two weeks ago cannot be relied on.

Not checking the employment agreement for the required notice period. Dismissing without notice, or giving a shorter notice period than the agreement requires, is a breach of contract regardless of the trial period status.

Letting consultation run past the expiry. Starting a consultation process with 20 days left in the trial period when the process requires 15 working days is cutting it very fine. Build in a margin.

Not checking the collective agreement. Some collective agreements contain express prohibition on trial periods for covered employees. Relying on a trial period clause for a union member covered by such a CA is ineffective.

Checklist: Trial Period and Restructure

Before taking action where a trial period and a potential restructure overlap:

[ ] Confirm the trial period clause is valid (in writing before day 1, new employee, maximum 90 days, unambiguous)

[ ] Confirm the trial period is still active and note the exact expiry date

[ ] Determine the correct pathway: genuine redundancy or trial period dismissal

[ ] If genuine redundancy: build a realistic timeline for the full consultation process and confirm it fits within the trial period (or decide to let the period expire first)

[ ] If trial period dismissal: prepare the written notice and serve it before the trial period expires

[ ] Do not mix both pathways in the same letter or process

How Restructured Helps

Restructured tracks each affected employee through the ERA 2000 consultation process, including flags for employees who are within a trial period at the start of the restructure. The consultation timeline tool shows whether the full process can be completed within the trial period, making the timing risk visible before it becomes a liability.

---

*This article provides general guidance on the interaction between 90-day trial periods and restructuring in New Zealand and does not constitute legal advice. The ERA 2000 provisions relating to trial periods are subject to case law interpretation that is fact-specific. For advice on your situation, consult a New Zealand employment lawyer. Employment New Zealand also provides free guidance.*