Probationary employees and statutory notice of termination

Jul 10, 2017

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Probationary employees and statutory notice of termination

A recent decision regarding probationary periods in employment contracts provides lessons for employers and employees alike.

A probationary period is the basic concept that an employer is permitted to terminate an employee without notice or cause for a specified period of time at the beginning of the employment relationship. The period of time is typically 3-months, but could be longer or shorter depending on the contract of employment.

In Nagribianko v. Select Wine Merchants Ltd., the Ontario Court of Appeal upheld a decision against an employee who claimed wrongful dismissal during his probationary period. The court noted that the probationary period imposes restrictions on the employer’s power to terminate and on the employee’s right not to be terminated, stating:

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.[1]

In this case, the parties had signed an employment contract. The contract included a probationary period of 6 months. The employee was aware of the probationary period when he signed the contract. Before the 6-month period was over, he was terminated on the basis that he was considered “unsuitable for regular employment.” The employee was given notice of one-week.

Statutory notice or pay in lieu of notice

The court confirmed the legal position that, generally speaking, an employment relationship can only be terminated with reasonable notice or pay in lieu of notice, stating:

It is true that there is a presumption that an indefinite employment contract is terminable only on reasonable notice, however that presumption is overcome if the parties agree to a probationary period of employment.[2]

In Ontario, the Employment Standards Act makes minimum notice periods (a variant of reasonable notice) a statutory responsibility of all employers. But since it’s not possible to contract out of the minimum notice periods, the court found that probationary employees are entitled to receive statutory notice.[3] In this case, the required period of notice was one week, which the employee received.

 

[1] Nagribianko at para 6.

[2] Nagribianko at para 7.

[3] Nagribianko at para 8.

 

The take away

This case is notable for the proposition that employers are still obligated to provide statutory notice of termination, or payment in lieu, for probationary employees. As a result, employers should not view probationary periods as removing the obligation to comply with statutory notice periods. When making decisions to terminate, the Employment Standards Act must always be consulted. This is true even where a probationary employee is terminated for unsuitability.

A worrisome precedent

In Nagribianko, the unsuitability at issue was that a key customer refused to deal with the employee. The decision did not address the fact that no reason or explanation was provided for this refusal to deal with the employee. That the customer refused to deal with him was sufficient to justify the employer’s decision to terminate on the basis of unsuitability. In dismissing the appeal, the court found the employer was within its rights to terminate for unsuitability.

Though the lower court decision did cite characteristics of suitability, as described in a 1974 decision of the court, there was no stated requirement to provide a reason for dismissal besides a lack of suitability. As long as notice, or pay in lieu of notice, was given, there was no necessity to justify the termination beyond suitability.

What to do?

Employers would be well-advised not to take this decision as being too permissive of termination. There are potential situations that could arise, and which were not relevant to this case, that could put an employer at risk of liability. For instance, a situation could arise where a customer refused to deal with an employee because the employee is of a certain race or religion, or any of the prohibited grounds of discrimination under the human rights legislation. In theory, in such circumstances, if the employer fired the employee for unsuitability, it may be liable for a breach of the Ontario Human Rights Code. Also, consider situations where the customer is hostile or abusive to the employee. An employer may easily find itself in breach of its anti-harassment obligations, contrary to the Occupational Health and Safety Act.

Employers should exercise caution before relying on probationary periods as part of a risk-mitigation strategy. At the very least, probationary periods should be supplemented with strong training and orientation of new employees. Once an employee has received the proper supports, it will be easier to prove unsuitability if issues arise in response to terminating the employee.

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