What Employers Should Know in Terminating Probationary Employees

July 10, 2013

The common law concerning probationary employees has evolved to provide greater fairness to those who are working toward becoming permanent employees.  At one time a probationary employee could be dismissed without cause and without notice.  Canadian courts have now consistently held that probationary employees must be treated fairly and given reasonable opportunity to demonstrate their ability to do the job they have been hired to perform, prior to termination.  In the absence of such justification for termination, an employer must provide notice of termination, or pay in lieu of notice, to a probationary employee.

Employment standards legislation provides that employees with less than three months of service (six months in some provinces) are not entitled to any notice of termination or pay in lieu of notice.  As such, it is sometimes thought that an employee who is dismissed during the initial three (or six) months of employment is not entitled to any notice of termination.
A recent decision from the Ontario Small Claims Court, Cao v. SBLR LLP, 2012 CarswellOnt 9184, is a careful reminder to employers that terminating during the initial three months of employment does require the employer to treat the employee fairly and without discrimination in termination.  It also drives home the importance of having a properly worded employment agreement that sets out what the probationary period is and what notice will be provided if termination during the probationary period occurs.
In Cao v. SBLR LLP, a tax accountant was hired by an accounting firm following an extensive interview process.  After satisfying the conditions of employment, the employee entered into an employment contract with her employer. The employment contract stipulated a probationary period of three months, but did not include a notice period for termination within the probationary period.
During the first month of her employment, the employee was called into her first meeting with management.  Unbeknownst to her, it was for the purpose of terminating her employment.  The employer advised that she not performing at the required level of an intermediate accountant and that she was required to obtain her CGA (Certified General Accountant) designation by the following summer (despite the fact that the course schedule would not allow for this finish date).
The Court confirmed that an employer has just cause to terminate a probationary employee if it has shown that the employee was unable to meet the job requirements.  The employer’s decision of unsuitability must be reasonable and reached after the employee has been given a fair opportunity to demonstrate his or her ability.
The Court found that the employer did not lead sufficient evidence at trial to prove the allegations concerning the employee’s qualifications or that she was unable to meet the job requirements. In considering whether the employer satisfied its duty to act reasonably or fairly towards the employee, the Court considered the following facts:
  • The employee was given only five tasks to perform during the term of her employment;
  • The employee was not given any negative feedback prior to the termination meeting;
  • The employer did not follow its own policies regarding performance reviews prior to terminating employment; and,
  • The termination letter did not allege just cause for her dismissal.
The Court concluded that the employer did not have cause to terminate the probationary employee and, furthermore, that the employer terminated her in bad faith. The employee was entitled to reasonable notice in accordance with common law principles.  Based on a review of relevant case law, the Court awarded damages to the employee in the amount of four months notice, totalling $20,000.00, plus costs and disbursements.
Employers must be aware that probationary employees may be entitled to notice upon termination. In order to better defend against a common law claim for notice of termination, employment contracts should include notice periods for termination during the probation period or refer to the minimum standards found in employment standards legislation.  The common law notice requirement is presumed in employment contracts, and will be rebutted only by clear and unambiguous language in the contract.
In dealing with probationary employees, it is prudent to:
  1. Enter into a written contract of employment with a new employee that clearly sets forth the probationary period, and the notice period to be given for termination in the probationary period;
  2. Review the conditions of probationary employment with the employee at hiring and have the employee sign off on their understanding and acceptance of these conditions.
  3. Assess the employee’s performance and suitability for the position during the probationary period in relation to the requirements of the specific position.  Suitability for the position may include an assessment of character and compatibility in the workplace.
  4. Notify the employee during the probationary period of any deficiencies and give the employee a reasonable opportunity to improve performance/meet expectations.  The employee should be informed that failure to improve may result in termination of their probationary employment.

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