04.09.2019

Court of Appeal considers the law on notice during a Trial Period… are we all clear now?

In Ioan v Scott Technology NZ Limited, the Employment Court looked at the requirement to give notice during a trial period termination under the Employment Relations Act 2000 (Act).

Mr Ioan’s employment agreement had a termination notice period of four weeks.  It also allowed Scott Technology to “elect to not require the employee to work out the required notice in which case the remaining balance of the notice period shall be paid by the Employer”. 

In a letter dated 7 October 2016, Scott Technology advised Mr Ioan that his employment would end in accordance with the trial period clause.  It also elected to pay Mr Ioan for his notice period of 4 weeks, but did not require him to work.  On 19 October 2016, on his usual pay day, Scott Technology paid Mr Ioan four weeks’ salary together with holiday pay.

Mr Ioan sought to bring a claim of unjustifiable dismissal in the Employment Court. 

The Employment Court held that Mr Ioan was prevented from bringing the claim because section 67B of the Act applied.  That section states that if an employer terminates an employment agreement containing a trial provision by giving the employee notice of the termination before the end of the trial period, the employee may not bring a personal grievance or legal proceedings in respect of the dismissal.

Dissatisfied with the Court’s decision, Mr Ioan obtained leave to appeal to the Court of Appeal on a question of law.  In a nutshell, that was whether paying an employee instead of the employee working the notice period complied with the requirement under section 67B(1) to give notice?  If so, the employee would be prevented from raising a personal grievance. 

The Court of Appeal answered ‘yes’.  It confirmed that the notice of the termination in a trial period termination includes a situation where the employer gives the requisite period of notice, but does not require the employee to work out the notice period, instead making a payment for the period of the notice (commonly referred to as ‘garden leave’).  In this situation, the employee’s employment would still end at the end of the notice period. 

The Court of Appeal did not express a view on whether it is unlawful to pay an employee salary or wages in lieu of notice, which usually means that the employee’s employment ends immediately. We have previously written in some detail on this topic for those who wish to delve into this potentially thorny issue. 

The difference between paying in lieu of notice, and paying instead of working out notice is a very fine distinction.  The legal difference is the point at which employment comes to an end – either when the notice is given (in lieu of notice), or at the end of the notice period (instead of working notice).  The practical difference for an employee is limited; the employee leaves work at the same point and is paid final pay at the same point.

The safest course of action, following the Court of Appeal’s decision, is to have employment terminate at the end of the notice period, even if the employee is not required to work out the notice period.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Rewriting the Risk: Lessons from John Sisk & Son Ltd v Capital & Centric (Rose) Ltd [2025] EWHC 594 (TCC)
A recent decision by the English High Court, John Sisk & Son Ltd v Capital & Centric (Rose) Ltd [2025] EWHC 594 (TCC), considered the interpretation of a risk allocation provision under a besp...
09.07.2025 Posted in Construction & Disputes
Can Contractors Terminate for Repeated Late Payment? Key Lessons from Providence v Hexagon
The decision of the English Court of Appeal in Providence Building Services Ltd v Hexagon Housing Association Ltd [2024] EWCA Civ 962 provides important guidance on a contractor’s termination right...
09.07.2025 Posted in Construction & Disputes
Property
Make Your Premises Good Again
With all the time, effort and cost that goes into taking on a new lease of commercial premises, what happens when it comes time to move on can seem unimportant. It is not surprising, then that make-go...
25.06.2025 Posted in Property
Flooded car
Flooding due to overland flow paths and damaged drainage
Persistent heavy rainfall across the country often results in damage to property due to flooding caused by overland flow paths and defective drainage.  But who is responsible for the cost of the dama...
17.06.2025 Posted in Climate Change & Property
Understanding Indirect Privacy Notification: What you need to know
The Privacy Amendment Bill (the Bill), if passed into law, will require agencies to notify individuals when their personal information is collected from a source other than the individual themselves, ...
16.06.2025 Posted in Corporate & Commercial & Employment
iStock  Succession Plan medium
Family Ties: Intra-Family Succession and Exit Planning
As the second instalment in a series of articles looking at the generational wealth transition and its impacts on business succession in New Zealand, Ben Hickson (partner, Corporate & Commercial...
16.06.2025 Posted in Corporate & Commercial & Private Wealth
Employment law at a glance – June 2025
If you are anything like us, you will be shocked to realise that we are halfway into 2025. As time has been marching on, so too have employment law developments – and there have certainly been quite...
05.06.2025 Posted in Employment
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.