I draft employment contracts for most of my employer clients. When doing so I always ask whether the employer wants to include a probationary period clause in the contract.

A recent case highlights some of the issues that arise when there is a probationary clause in an employment contract.

In this particular case, an employee who had been lured from secure employment signed an employment contract with a six-month probation clause. The question was whether he was entitled to “reasonable” notice of termination?

What is Probation?

According to the judge hearing this case, “Probation is a testing period for the employer to assess a probationary employee’s suitability. It offers the employer an opportunity to determine if the employee will work in harmony with the organization, if hired permanently. Suitability includes considerations of the probationary employee’s character, ability to work with others, and ability to meet the employer’s present and future standards.” … “Probationary employment, on its face and by its nature, is inconsistent with any inducement or promise of long-term employment.”

What are an Employer’s Obligations During Probation?

According to the judge hearing this case, “A probationary employer must extend to the probationary employee a fair opportunity to demonstrate suitability for permanent employment. However, in the absence of bad faith, an employer is entitled to dismiss a probationary employee without notice and without giving reasons.”…” “All that is required is that the employer show that it acted fairly in determining whether the probationary employee was suitable and that he/she was given a fair opportunity to demonstrate his/her ability.”

Judge’s Decision

Justice Sanderson concluded: “Since the employer was entitled to terminate the probationary employment in good faith during the probation period, it is not necessary for this Court to determine the period of reasonable notice.” It appears the judge concluded that the employee was entitled to the one week notice of termination he was entitled to receive under Ontario’s Employment Standards Act as opposed to the 4 months termination pay the trial judge had awarded the employee. We do not know whether this decision has been appealed.

Lessons to Be Learned

1. This case states that an employer has the onus of proving that a probationary employee was provided with “a fair opportunity to demonstrate suitability for permanent employment.” What does “fair opportunity” mean? Does it mean that the employer is required to monitor a probationary more closely than a non-probationary employee?
2. In situations where the employer wants the right to terminate an employee without notice during the first three months of employment there is no need for a probationary clause if the employer has a without cause termination clause which gives the employer the right to terminate an employee’s employment by providing the minimum notice of termination required under Ontario’s Employment Standards Act.
3. In situations where the employer wants a probationary period in excess of three months then the employer can consider including an early termination provision in the probationary clause.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]