Including a probationary period clause in an employment contract is not a good idea unless your organization is prepared to assess the suitability of the employee during the probationary period.
Failure to do so can result in your organization being ordered to provide a probationary employee with common law reasonable notice of termination.
This blog discusses one such case.
Probationary Employee Awarded Three Months Termination Pay
The Contractual Language
In Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42, an employee signed back an offer of employment which included the following sentence: “Employees are required to serve an initial probationary period of six (6) months for new positions.”
The contract was silent on the employee’s rights and the employer’s obligations with respect to terminating the employee’s employment during the probationary period.
What does the term Probation Mean?
The judge in this case stated: “The term “probation” is well understood in business and industry as one where an employee is being assessed by the employer to ascertain the suitability of the employee as a permanent employee: …”
What does Assessing Suitability Require?
The judge stated: “An employer needs only to establish that it acted in good faith in its assessment of the probationary employee’s suitability: …
In determining whether an employer acted in good faith, courts have examined the process through which the employer determines whether the employee is suitable for permanent employment. While an employer is not required to give reasons for the dismissal of a probationary employee, that employer’s conduct in assessing the employee is reviewed by the court in light of various factors such as:
1) whether the probationary employee was made aware of the basis for the employer’s assessment of suitability before, or at the commencement of, employment;
2) whether the employer acted fairly and with reasonable diligence in assessing suitability;
3) whether the employee was given a reasonable opportunity to demonstrate his suitability for the position; and
4) whether the employer’s decision was based on an honest, fair and reasonable assessment of the suitability of the employee, including not only job skills and performance but also character, judgment, compatibility, and reliability: …”
How Much Notice of Termination Was the Probationary Employee Entitled to Receive?
Because the judge found that the employer had not made a good faith assessment of the employee’s suitability the judge concluded the employee was entitled to reasonable notice of termination using the Bardal factors: “Having considered the length of Mr. Ly’s employment, including the probationary term of his employment, along with his age, the character of his employment, the availability of his employment, and his experience, training and qualifications, I am of the view that a three-month notice period is reasonable in this case.”
Lessons to Be Learned
- Think long and hard about whether you need a probationary clause in an employment contract.
- If the reason for this clause is to terminate a probationary employee with as little notice of termination as legally required then this objective can be accomplished with a properly worded termination clause.
- If you want to include a probationary period in an employment contract then make sure your organization makes a good faith effort to assess the employee’s suitability. This requires management time including answering suitability questions from the probationary employee.
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]
In the recent decision of Andros v Colliers Macaulay Nicolls Inc., the Ontario Court of Appeal (“OCA”) found yet another termination clause to be unenforceable. In this decision, the OCA reaffirmed and clarified various principles surrounding the enforceability of such clauses.
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