Probation at the start of employment may seem simple, but they don’t always automatically allow employers to fire someone in their first 3 months free and clear. Probationary periods are actually legally intricate.
Employees terminated during probationary periods often accept their fate without seeking legal advice when in many cases they may be eligible for severance payments (even severance payments of several months or more). Likewise, employers may dismiss an employee within a probationary period only to be surprised and unprepared when they’re told termination pay for wrongful dismissal is owed.
Purpose and Effect of Probation Periods
The reason for probationary periods in employment contracts is to provide a safeguard to employers. It allows an employer a period of time to assess a new hire on their suitability for the role. This benefits employees to the extent that an employer may be more willing to take a chance on an employee they are not certain about, if they have a period of time to change their mind without consequence.
The Ontario Employment Standards Act (“ESA“) does not define probation or probationary period. Instead, it allows an employer to terminate an employee without cause in the first three months of employment, without notice or pay in lieu of notice. It frequently doesn’t matter, therefore, for the purposes of the Employment Standards Act whether an employment contract contains a probationary clause (although it is important that the probationary clause does not provide for less notice than the minimums required under the ESA). If an employee is employed less than 3 months, under the ESA, he or she gets no ESA notice. If an employee is employed 3 months or more they are entitled to ESA notice. The existence, or lack thereof, of a probationary clause doesn’t change this.
The true purpose of a probationary period in an employment contract is to rebut the common law rule that employees are entitled to reasonable notice.
It may come as a surprise to some that even if you’ve been employed for a single day (or even if you haven’t started yet), the Courts have declared that terminated employees are entitled to some form of notice or pay-in-lieu of notice. In fact, recent trends in case law, suggest that short term employees (people employed only a few months) may be entitled to even more notice. A properly drafted and enforceable probationary clause may rebut this presumption and disentitle employees on probation to notice.
Termination within Probation Periods
In order for an employee to be subject to a probationary clause it generally must be:
- expressed (in writing) – the courts will not imply the existence of a probation period;
- it must be neither vague or ambiguous; and
- it must not provide for less notice than the minimums set out in the ESA
Further, and most critically, in order for an employer to be relieved from paying reasonable notice to the terminated probationary employee, it must act in good faith. This means that it must have provided the employee with a fair opportunity to demonstrate their suitability for the role and acted fairly in determining that the employee was unsuitable for the role.
Defining “suitability” can be challenging. The Courts recognise that assessments of probationary employees involve the consideration of factors that are intangible and subjective. As a result, they often extend wide discretion to employers. Overall, the grounds used to establish unsuitability must be reasonable and must demonstrate that employees are given a fair chance to meet the requirements of the job.
Example of factors that may be taken into consideration to determine suitability of a probationary employee are as follows:
- Attitude and compatibility
- Capability and skill
- Capacity to meet future production requirements
Clear and Unambiguous
Courts pay strict attention to the wording and language of any probationary periods. They must be clear and unambiguous. The court will not likely imply a probationary clause from the contract term “employee performance will be reviewed after three months”. However, in at least one case, the Ontario Court of Appeal concluded that the clause “Probation… six months” was enforceable and that the word “probation” in that case had a clear and unambiguous meaning that the employer could rely on to limit the employee’s notice. See for example: Nagribianko v. Select Wine Merchants Ltd., 2017 ONCA 540 (CanLII)
Best Practices for Employers
Best practice is for an employer to take steps to document the specific actions taken to determine suitability or unsuitability. Employers should:
- Communicate the expected reasonable standards;
- Inform the employee of any deficiencies as they arise;
- Explain that any failure to address and try to improve deficiencies will result in termination of employment at the end of the probation period; and
- Provide the employee with a chance to show that they tried to improve.
The important thing for employers to do, is to honestly treat the probationary period as a time for evaluation and training. The employer should work with the employees on a regular basis to determine if they can be transitioned into the role successfully. Actions taken to carefully assess, advise and remedy performance issues should be evident. Any decision about dismissal should not be made at the last moment, give regular performance review so that a decision to terminate prior to the end of the probationary period isn’t a surprise to anyone.
If you are interested in learning how to update your employment contracts to include a probation period, take a look at my article “How to Change Employment Contracts” or feel free to contact me.
Tips for Employees
Anyone terminated from their employment, whether within a probationary period or otherwise, should seek legal advice.
Contact Justin W. Anisman
Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.