This article will explore the meaning of “probationary period” that employers often use in their employment contracts when they are testing out new employment relationships.
What are Probationary Periods?
A probationary period is commonly meant to mean the three month term that employers utilize to evaluate whether a new employee is a proper fit for a job. Under Ontario’s Employment Standards Act, 2000 (the “Act”) employer’s shall not terminate employees for have been continuously employed for three or more months, unless the employer provides written notice or pay in lieu of notice under the Act. During the three month probationary period, employers are not required to provide notice or pay in lieu. Under the Act, there is no statutorily defined term and as such, probationary periods are creations of contract law rather than being statutorily mandated.
After the passing of the three month term, the notice of termination provisions in Section 57 become applicable regardless of whether or not parties agreed to a longer probationary term under contract.
Common Law Treatment of Probationary Periods
The common law places higher standards during termination as opposed to the statute. Under the common law, employers must act in good faith during both termination and the employment relationship, they are required to uphold the duty of honesty in performing their obligations under contract and they owe probationary employees a duty of fairness such that employees must be provided with a fair opportunity to demonstrate their ability on the job.
Where the employment contract does not have explicit language regarding notice entitlements, probationary employees can be entitled to reasonable notice once terminated, under the common. Case law in this area has provided increased protection to probationary employees especially where there is no employment agreement or if there is ambiguous language in the termination clauses of the agreement.
If you wish to provide a probationary period to employees with reduced or zero obligation to provide notice or pay in lieu of notice during the initial three months, this should be clearly set out in the employment contract. For this clause to be effective in court the agreement should describe the length of the probationary period and it should determine the notice period or pay in lieu that will be provided if the employee is terminated.
In the Nagribianko v. Select Wine Merchants Ltd., 2017 ONCA 540 decision, the appellant (employee) whose employment was governed by a written contract with a six-month probationary period was terminated after four months. The contract had the following language on probation: “Probation….Six months.”
At trial, the judge found that “probation” was unclear and accepted the subjective understanding of the employee which was that if he performed well, his employment would continue once the probationary period ended. Common law reasonable notice was awarded or four months.
During the appeal, the Divisional Court overturned the ruling given that the lower court:
(a) failed to realize the different nature of employment for a probationary versus non probationary employee;
(b) the standard to dismiss during probation is suitability as opposed to just cause;
(c) when interpreting contracts, a reasonable person test should have been used to gauge objective intentions and not subjective intent which is irrelevant;
(d) failed to realize that the contracts probationary term of six months was clear.
The ONCA upheld the Divisional Court’s decision stating: “the status of a probationary employee has acquired a clear meaning at common law. Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their suitability.”
If you are seeking a Toronto employment lawyer to properly draft an employment agreement that foresees the possibility of termination during the probationary period, contact Stacey Ball at 416-921-7997 extension 227.