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Even after going through a long recruitment process to employ the right person for a role with your business, problems can occur and it may be tempting to try to dismiss the new employee before they start in the role. However, if they have signed an employment agreement with your company, there are few cases where you can legally dismiss them, and you may be risking breaking New Zealand law if you do so. This article will set out why dismissing an employee before they start in New Zealand is generally hard to do and the instances where you may be able to dismiss someone

You Generally Cannot Dismiss an Employee Before They Start

Once a person becomes your employee, New Zealand law sets out the specific ways they are able to be dismissed. The most common of these include:

  • misconduct;
  • poor performance; or
  • incapacity.

Each of these requires a thorough process that must be fair and reasonable, and you must act in good faith. Because of this, dismissing an employee before they have started does not really fit into the standard processes for dismissal:

  • usually (though there are exceptions), the employee has not committed any misconduct before they have started work;
  • they have not commenced their role so cannot have shown any poor performance; and
  • while they may have been incapacitated between the employment agreement being signed and starting work, you typically must allow the employee some time before dismissing them for incapacity.

In addition, employment law in New Zealand has a mutual good faith obligation between employee and employer as a cornerstone of the system.

In most instances, dismissing an employee before they have started work would be seen as a bad faith measure. Consequently, it would give your company some risk of liability if the employee raised a case against you for breaching their employment rights.

However, despite this general presumption against dismissing employees before they have started, you may have very good reason to want to dismiss an employee before they have started, particularly if something has gone wrong during the recruitment period. For this reason, it is important to know your options.

What Is in the Employee’s Employment Contract?

To some extent, you can give yourself and your company some protection by including terms in the employment contract that covers against something malicious or dishonest in the recruitment process.

For instance, a common reason for wanting to dismiss a new employee is if they have lied or misrepresented themselves or their credentials.

You can include wording in a contract that employment is subject to the information the candidate has supplied being verified and true, or subject to reference checks. Then, if the reference checks prove dissatisfactory, you have grounds to cancel the contract.

You should speak to a lawyer if this is the wording you would like to include in your employment offer.

Is There a Trial Period?

You can also provide yourself with some flexibility by including a trial period in the employment agreement. Trial periods, also known as 90-day periods, provide an employer with a time period up until three months to be able to dismiss an employee without cause. 

However, you must still follow the relevant notice period in the employment agreement. If you are looking to exercise a trial period clause to dismiss an employee before they start, you must still give the minimum notice period, whether it is:

  • a week;
  • two weeks; or
  • four weeks etc.

Not all companies can offer trial periods. Only companies with fewer than 20 employees can use trial periods since recent law changes by the government. Any trial periods used by larger companies are automatically invalid. 

Key Takeaways

It is very difficult to legally dismiss an employee before they start in New Zealand. Generally, doing so would be a breach of employment law, and would raise the risk of litigation against your company. However, there may be instances where you can justifiably and legally do so. These would usually be when the employee has misrepresented themselves in some way, and that this breached a term in the employment agreement. You may also be able to rely on a trial period clause. However, these require specific wording in an employment agreement. If you want to know more about drafting an effective employment contract, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

When can I dismiss an employee before they begin work?

Usually, you cannot do so. However, depending on the reason you want to dismiss them (ie, they may have misrepresented their credentials) and the detail of their employment agreement, you may be able to do so in limited circumstances.

How do I dismiss an employee using a trial period?

You must give notice to the employee that they are being dismissed. It is best practice, but not technically required, to explain your reasoning when you give this notice to employees. Remember that you cannot give less notice than is in their employment agreement, whatever that period is.

What do I do if my new employee has lied about their references?

It is best to consult an employment lawyer if you would like to dismiss a new employee who has lied about their credentials or their references. You may be able to dismiss them if there is language around the issue in question in the employment agreement.

Can I make a new employee redundant before they have started?

No. This would be seen quite clearly as not a genuine redundancy, and a legal redundancy dismissal typically requires a lengthy process of consultation and planning.

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