We are seeing a continued focus from the Employment Relations Authority on the correct use of employment agreements and 90-day trial periods. A recent case, King v Off the Wall Construction Ltd NZERA 14, is a timely reminder of how easily things can go wrong — and how expensive the consequences can be.
What happened?
In this case, the employee completed some “cash work” for the employer before signing a formal employment agreement that included a 90-day trial period. Shortly after starting, the employment relationship broke down, and the employer relied on the trial period to terminate employment. The key issue was whether the employee was truly a “new employee” at the time they signed the agreement.
What did the Authority decide?
The Authority found that:
The employee was already employed from the date they first performed work (even though it was described as “cash work”).
Because they were not a new employee at the time they signed the agreement, the 90-day trial period was invalid.
The dismissal, based on that invalid trial period, was unjustified.
The outcome
The employer was ordered to pay:
$13,650 in lost wages
$15,000 in compensation for hurt and humiliation
This is a significant cost for what is a very common scenario in practice.
Key takeaways for employers
This decision reinforces a few critical points:
Trial periods only apply to genuinely new employees. Any prior work — even informal, casual, or paid “cash in hand” — may count as employment.
The employment agreement must be signed before the employee starts work. This includes any trial shifts, training, or “see how it goes” days.
If a trial period is invalid, the employee has full rights to raise a personal grievance for unjustified dismissal.
Labelling someone as a contractor or casual worker does not override the real nature of the working relationship.
Practical steps
We recommend employers:
Ensure your employment agreements have the correct trial period clause
Avoid allowing any work to be performed before a signed employment agreement is in place.
Be cautious with trial shifts, work trials, or informal arrangements.