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Trial periods – paying out notice period

October 3, 2019

The Court of Appeal recently looked at the question of whether an employer can pay out a notice period during a trial period. The answer is yes, if the employment agreement provides for this.

The employment agreement in question provided for 4 weeks’ notice of termination. The employer terminated employment based on a trial period provision and elected not to require the employee to work out the required notice but instead, to pay the employee for the notice period.

The Court didn’t consider the different question of whether an employment agreement can provide for payment in lieu of notice where there is a trial period. This is a matter that awaits determination by our higher courts. The safest course is to have a trial period that meets the requirements of the Employment Relations Act, that provides for notice to be given, and allows the employer to pay out some or all of the notice period rather than requiring the employee to work for some or all of the notice period. Note that the employment still ends on the termination of the notice period – the employee would remain employed notwithstanding that they aren’t required to attend work.