In the recent decision of Senate Investment Trust v Cooper [2021] NZEmpC 45, the Employment Court confirmed that an employment agreement containing a 90-day trial provision had to be signed prior to the employee undertaking employment to be valid and enforceable, reaffirming the Court’s strict approach in analysing trial provisions under the Employment Relations Act 2000.
Facts
The factual background relating to the trial provision can be summarised as follows.
On 30 May 2018, Matthew Cooper responded to a Senate Investment Trust (“Senate”) advertisement on TradeMe and had a successful telephone interview with Senate’s director Mr Sowry the following day. Mr Cooper was living in Greymouth at the time and, upon being offered the labourer position with Senate, intended to move to Palmerston North.
Because he was going to be moving from the North Island, Mr Cooper was seeking to get moving assistance from Work and Income and therefore requested an employment agreement from Mr Sowry on 31 May 2018. Mr Sowry provided the employment agreement that same day and informed him that Senate would need a signed copy of the agreement upon his arrival in Palmerston North.
Between 31 May and 17 June, there were various communications between Mr Cooper and Mr Sowry, in which Mr Cooper provided his IRD and bank details. During these conversations, Mr Cooper did not raise any issues with his employment agreement. On 18 June, Mr Cooper arrived on site and commenced working for Senate. He did not physically sign the employment agreement prior to starting.
Court’s decision
The main legal issue in this case was whether Senate could rely on the 90-day trial provision contained in Mr Cooper’s unsigned employment agreement.
Senate argued that Mr Cooper implicitly accepted the terms of the employment as he did not raise any issues with the employment agreement or otherwise indicate that he did not accept the terms contained therein. This was despite Mr Cooper having the agreement for 18 days prior to commencing work and specifically relying on the existence of the employment agreement to obtain moving assistance from Work and Income. Senate further argued that if Mr Cooper did have an issue with the terms, he had a good faith obligation to raise those issues with Senate and his failure to do so would constitute a breach of good faith.
The Court was not persuaded by these arguments and held that Senate’s failure to get Mr Cooper to sign the employment agreement prior to commencing work was fatal and rendered the trial provision invalid.
Implications for small employers
This case provides a strong reminder to small employers: if you want a trial provision to be enforceable, ensure that the employee signs the employment contract prior to starting, as it will be difficult (if not impossible) to argue that the employee has implicitly agreed to the provision in the absence of a signed agreement.
If you are wanting advice regarding drafting employment agreements, hiring new staff, or trial provisions generally, someone from our Employment Team would be more than happy to help you.
