Don’t make assumptions about employment probationary terms

Employment/Labour /
Ellen Low
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By Tony Poland, LegalMatters Staff • Probationary periods of employment are nothing new, but employers who fail to grasp the nuances involved can face significant legal consequences, says Toronto employment lawyer Ellen Low.

While a probationary term is a long-standing practice acceptable by law, there are many clauses which run the risk of failing to meet the legal standards dictated in the Employment Standards Act, 2000 (ESA), or common law, which could result in litigation by a terminated employee, says Low, principal of Ellen Low & Co.

“The law dealing with probation can be murky, as we have seen by some court rulings,” she tells LegalMattersCanada.ca. “A probationary period is permissible because it is contemplated in legislation, but it doesn’t by default make its way into each and every contract of employment.”

Low says the biggest assumption employers make is that they are automatically entitled to end an employment relationship without any notice within the first three months because probation is permissible by operation of the ESA.

‘It does not apply in all circumstances’

“But, it is important to know that it does not apply in all circumstances,” she explains. “The only time that the employer gets this 90-day free trial period, or this 90-day get-out-of-jail-free card, is when they have included it in a properly constituted, valid and binding contract of employment that specifically contemplates the earlier termination in accordance with the ESA.”

Any probationary period must be articulated to the employee, Low says.

“Some employers assume that the first three months of every employment relationship is an ESA-governed tryout period,” she says. “But what many people don’t necessarily understand is that just because something is included in the Employment Standards Act doesn’t mean they will be able to rely on it.”

Another mistake employers make is extending the probationary period beyond 90 days, says Low.

Court looks at the probationary provision

“The ESA dictates that you can have a probationary period, but it cannot be more than 90 days,” she says. “The Court will look carefully at the probationary provision because presumptively, the provision cannot violate or should not violate the Employment Standards Act. It would then become a question of ‘is there any language that properly addresses what happens after the 90-day period?’”

Low points to the 2017 British Columbia Supreme Court decision in Ly v. British Columbia (Interior Health Authority), which addressed probationary periods in employment contracts.

The plaintiff argued that the six-month probation clause in his contract was unenforceable because it did not meet the criteria set out by B.C.’s ESA.

The Court found provincial legislation does not require employers to give notice of termination to an employee who has been working for less than three months. However, if that person was employed for more than three months, statutory and common law notice requirements apply. The employee was awarded three months’ pay in lieu of reasonable notice.

Case ‘tells me all I need to know’

“This case essentially tells me all I need to know,” Low says. “We know that in the probationary period, the Court is in agreement that the employee has to demonstrate suitability requirements that are set by the employer and that the employee can be dismissed without reasonable notice.

“That typically covers the first three months of the probationary period,” she adds. “But what about the balance of the remaining six months of the probationary period? Is that covered in the general termination without cause section? This decision also raises the interesting question about the threshold – if there is even one – for dismissing a probationary employee.”

Low says even if a probationary period is included in the contract of employment, it still should hold up to careful scrutiny.

“Is there, for example, any contradictory language between the probationary period and the termination clause which might vitiate the enforceability of that probationary clause?” she says. “Occasionally there is a discrepancy between what is permitted by the probationary period clause versus what is permitted by the termination clause. Where there are two things that are contradictory, they can strike each other out in an employment contract.”

Not necessarily required to give reasons

During the 90-day probation period, the employer is not necessarily required to give reasons for dismissing a probationary employee as long as the worker is given notice either in accordance with the ESA or with the contract, Low says.

“However, there is still a good faith element to it where the court can review the employer’s conduct when someone is terminated during a probationary period,” she says. “Was the employee aware of the criteria by which he or she would be assessed? Was the employee given a reasonable opportunity to demonstrate their suitability for that position? Has the employer acted fairly and with reasonable diligence in assessing suitability?

“The courts don’t want to encourage using a probationary period as a 90-day free trial period with subjective decision-making to basically use someone for up to three months and fire them with no notice whatsoever,” Low adds. “The employer really ought not to be able to benefit from that probationary provision if they have acted in bad faith or in their own self-interest to the object dereliction of the employee’s rights.”

She notes that even absent a probationary clause in an employment contract, an employee can still be terminated pretty much at any time for any reason.

Entitled to seek compensation

“But that employee would be entitled to seek compensation in lieu of reasonable notice,” Low says.

She warns against making assumptions about probation, adding those who are terminated during a probationary period may still have recourse. Low also advises employers to review their employment contracts to avoid possible litigation.

“A probationary period may not be appropriate in some cases, such as managerial positions. Can you eliminate it altogether?” she says. “For the employee, could you negotiate for terms that are clearer with respect to what happens if you don’t pass probation.

“Many employment issues are open for review and negotiation,” Low adds. “Don’t assume that what is part and parcel of an employment contract is legally binding.”