This article will explore the meaning of “probationary period” that employers often use in their employment contracts and answer some of the most common questions that you may have about this period.
Q: What is a probationary period?
A probationary period refers to the period that employers utilize to evaluate whether a new employee is a proper fit for a job. Employers can terminate the employee during this period without proving any notice or pay in lieu. It generally runs for three months, but could be longer.
Q: Is there a mandatory three-month probationary period under the Employment Standards Act?
No. Under the Ontario Employment Standards Act, 2000 (“ESA”), there is no statutorily defined term. Thus, probationary periods are creations of employment contracts rather than being statutorily mandated. Employers must insert a probationary period clause in the employment contract to rely on this.
Although the ESA does not impose a requirement on employers for payment of mandatory termination pay during the first three (3) months of employment, it is not deemed as a probation period.
Q: Is a probationary clause always enforceable?
No. If a probationary clause in the employment contract provides less than minimum entitlements under the ESA, it is not enforceable.
According to the ESA, employers shall not terminate an employee without providing notice or pay in lieu if they have been continuously employed for three months or more. Therefore, within the first three months of hire, employers are allowed to terminate the employee without providing any notice or pay in lieu.
If there is a probationary period longer than three months under the contract, employers must provide at least the ESA minimum notice or pay in lieu if they terminate the employee without cause after three months during this period.
Q: There is no probationary period clause or the clause is ambiguous in my employment contract. What am I entitled to if I am terminated by my employer?
Where the employment contract does not have a probationary period or any explicit language regarding notice entitlements in the period, you are entitled to reasonable notice or pay in lieu, even if you are terminated within the first three months of your employment.
Q: What is the standard for dismissal of a probationary employee?
The standard for dismissal of a probationary employee is suitability. In Nagribianko v. Select Wine Merchants Ltd. 2017 ONCA 540 at para 6, the Court noted,
“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.”
Under the common law, employers must act in good faith throughout the employment relationship. The employer’s conclusion must be a reasonable one and properly motivated. They may take into consideration factors such as character, compatibility and an ability to meet the present and future production standards expected by the employer.
It is improper for employers to reach its conclusion to dismiss an employee before the employee has been given a fair opportunity to demonstrate his or her ability.
Q: Can an Employer Extend the Probationary Period?
Yes, if stipulated in the contract of Employment.
Employers usually extend an employee’s probationary period if they do not feel comfortable with the employee and require more time to assess the suitability of the employee. Generally, employers extend the probationary period if they believe: (a) the performance requirements expected of the employee are not being met, or (b) the employee’s behaviour (i.e., attendance) does not conform with the employer’s requirements, or (c) the employee does not hold the values of the employer.
The extension of the probationary period, like the probation period, is not automatic. The right to extend the probationary period must be set out in the original contract of employment. If an employer attempts to “extend the probationary period” without this right being stipulated in the original contract of employment, then this may constitute a constructive dismissal of the employee and may attract damages.
If the right to extend the probationary period is set out in the original contract of employment, then this provision, like the probationary period provision, must be exercised in good faith. Notably, if the employer extends the probationary period for an additional ninety (90) days, the Employer will be obliged to pay the mandatory notice or pay in lieu, under the ESA.
Probationary periods are not clear-cut and simple. Employers should consult an employment lawyer prior to dismissing an employee. Employees who may have been dismissed without the applicable severance may want to consult an Employment lawyer to understand the potential remedies that may be available to them.
Q: What is the probationary period advice for employers?
If you wish to provide a probationary period to employees with reduced or zero obligation to provide notice or pay in lieu 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. It should also determine the notice period or pay in lieu that will be provided if the employee is terminated.