KEY POINTS:
National recently announced that it will bring in a 90 day voluntary probationary period for new employees. This would apply to businesses with less than 20 employees, and would allow employers to dismiss a new employee within 90 days, without the risk of an unjustified dismissal claim.
This proposal generated tons of publicity, with no less a figure than Helen Clark launching a vociferous condemnation. It also seems to have struck a note with the public - there were 27 pages of comments in response to a Herald poll.
Under the current law, while employers and employees can agree to an initial probationary or trial period, the employer must still follow a fair procedure when dismissing a probationary employee. Case law suggests that this is not as extensive as the procedure for a longer serving employee, but a probationary employee must still be warned of their inadequate performance and given a chance to improve. Otherwise, any dismissal risks being unjustified.
National's policy has been bluntly criticised by the Labour party and trade unions. Helen Clark has labelled it as "completely daft", and Trevor Mallard said it is "almost a charter for people to abuse newly appointed, low wage workers".
But as some commentators have pointed out, you do not hire someone with the intention of firing (or abusing) them within 90 days. Recruitment is an expensive and time consuming activity, as is training. There are significant skill shortages in New Zealand, and employers want the person they appoint to succeed.
The other counter-argument is that strong rights for workers give security and fairness, and are an essential condition for lifting wages and living standards. With New Zealand currently entering a difficult economic environment, many believe we should be strengthening employee rights and job security rather than eroding them with policies such as this.
However, National and employers argue that the proposed policy has many significant benefits for New Zealand. The most pertinent of these is the enhanced flexibility it will give to businesses with less than 20 staff, which according to the National Business Review, make up 33% of all businesses, and account for 30 per cent of all employees. It will encourage small businesses to take a risk on workers they might otherwise be reluctant to employ, such as members of a different demographic, mothers re-entering the work-force, former prisoners or people with little work experience.
Small businesses have complained for many years that they face a disproportionate burden in most areas of employment law. For many of these employers, the decision to hire someone brings with it a legal risk which would be reduced by National's proposal. It could persuade employers to recruit more freely, something that would benefit the economy as a whole as the country descends into a recessionary period.
A further point is that many developed nations already have limited rights for new employees. In the UK, for instance, no employee can claim unfair dismissal in the first year of their employment, unless they have been dismissed for an automatically unfair reason, such as having made a disclosure under the UK's whistle-blowing legislation.
This is not to say that a similar regime would be good for New Zealand, but clearly some other jurisdictions are not as paternalistic in terms of employee protection during the initial period of employment.
Given that this will only apply to businesses with 20 employees or less, and will be limited to 90 days, the impact of the change will not be nearly as significant as it could be. It makes you wonder whether all the fuss that's been made about this is genuine, or more about making political capital in election year.
Greg Cain
Greg Cain is an employment lawyer at Minter Ellison Rudd Watts.
