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Probationary Employees: Employers' Termination Rights and Restrictions

Martin Smith
Martin Smith,
Partner

November 2015

By Martin Smith
First presented at an Employment Practices Liability Seminar

Introduction

Given that employers have an implied contractual right to dismiss a probationary employee without notice and without giving reasons, many employers believe that they are immune from claims brought against them after terminating an employee within his or her probationary period. Unfortunately for employers, this is not the case. Despite the existence of probationary periods, there are many limitations facing employers who wish to fire their probationary employees. It is crucial that employers understand these limitations in order to prevent claims from being brought against them.

Good Faith Assessments

First, employers must act in good faith in the assessment of the probationary employee's suitability for a permanent position.1 Not only that, but the Prince Edward Island Court of Appeal has stated that the test "has gone beyond the establishment of good faith in the employer's exercise of discretion" and requires both fairness and reasonable diligence.2 The Prince Edward Island Court of Appeal noted that the requirement that an employer act fairly and reasonably in making decisions about a probationary employee requires regular evaluation from the employer and discussions between the employer and employee about the employee's performance. These requirements give the employee an opportunity to "correct any defective action".3

The following is the test provided by the Alberta Court of Appeal for dismissing probationary employees:

...the employer need only establish that

  1. he had given the probationary employee a reasonable opportunity to demonstrate his suitability for the job;
  2. he decided that the employee was not suitable for the job;
  3. that his decision was based on an honest, fair and reasonable assessment of the suitability of the employee, including not only job skills and performance, but character, judgment, compatibility, reliability, and future with the company".4

In deciding suitability, the employer's standards must be reasonable enough that it is possible for a probationary employee to succeed.5

Although these are not Ontario cases, they are persuasive and clearly state that the employer must establish that the terminated probationary employee was unsuitable based on the criteria above.

More recently, in Cao v SBLR LLP,6 a tax accountant was hired by an accounting firm. Her employment contract stipulated a probationary period of three months. However, it did not include a notice period for termination within the probationary period. The employee was terminated during her first month of employment. Her employer advised that her performance was insufficient and that she needed to obtain her Certified General Accountant designation by the following summer, despite the course schedule making this impossible. The Ontario Superior Court of Justice considered the following facts to determine whether the employer satisfied its duty to act reasonably and fairly towards the employee:

  • The employee was given just five tasks to perform during the term of her employment;
  • The employee had not been given any negative feedback before the termination meeting;
  • The employer did not complete performance reviews before terminating the employee; and,
  • The termination letter did not allege just cause for her dismissal.

As a result, the Court concluded that the employer lacked cause to terminate the employee and that the employer terminated the employee in bad faith. As a result, the employee was awarded damages in the amount of four months' notice, which totalled $20,000.00, plus costs and disbursements.

Manner of Termination

In addition, an employer has a duty to act in good faith in the manner of termination of an employee.7 The employer must not engage in behavior that is unfair or is in bad faith.

i. Notice Period

Despite employers having an implied contractual right to dismiss a probationary employee without notice, courts have held that probationary employees are entitled to a notice period.8 In fact, in Mourant, a plaintiff who found alternative employment within a short period of time after his dismissal was nonetheless entitled to a 9-month notice period.9

Likewise, in Taggart v K.D.N. Distribution & Warehousing Ltd.,10 the plaintiff was terminated after three months of employment. He had been hired to start up a business for the defendants. The plaintiff asserted that he was unjustly dismissed. The Nova Scotia Superior Court acknowledged that employers face a "lower standard when justifying the dismissal of a probationary employee".11 Nevertheless, the Court reasoned that a probationary employee is "not retained exclusively 'at the will' of the employer".12 Importantly, the Court found that probationary employees should have reduced awards compared to regular employees. In finding this, the Court referred to Kirby v Motor Coach Industries,13 in which the Manitoba Court of Appeal stated:

At the very least the plaintiff's probationary status has an effect on the length of notice. What constitutes reasonable notice for a probationary employee may well be insufficient for a regular employee. In the instant case, probationary status is reflected in the magnitude of the compensation in lieu of notice. Probationary status is one of the circumstances to take into account in assessing appropriate compensation.

Nevertheless, the Court in Taggart held that if the plaintiff was deemed to be a probationary
employee, he would be entitled to four months' notice.

ii. Damages

Courts have also repeatedly recognized that short term and probationary employees are more
vulnerable than normal employees, and as a result have awarded higher damages in wrongful
dismissal actions.

The following are examples of the higher damages that have been awarded to probationary
employees:

  • A probationary employee who was dismissed after three months was awarded six
    months' pay in lieu of notice.14
  • A fire inspector who was terminated after 3.5 months was awarded five months' pay in
    lieu of notice.15
  • A manager who was terminated after 13 months was awarded six months' pay in lieu of
    notice.16
  • A senior executive at a Montreal firm who was terminated after 11 days was awarded almost six months' pay in lieu of notice and $8,000 in moral damages.17

Conclusion

Employers must be aware that probationary employees may be entitled to notice upon termination. In order to avoid claims against them, employers must act in good faith in the assessment of the probationary employee's suitability for a permanent position. Moreover, employers have a duty to act in good faith in the manner in which they terminate employees.


1 Jadot v Concert Industries Ltd. (1995), 10 CCEL (2d) 13 (BCSC); aff'd, 1997 CanLII 4137 (BCCA), 33 CCEL
(2d) 29 (BCCA).
2 Alexander v Padinox Inc., 1999 CanLII 4542 at para 17.
3 Ibid at para 24.
4 Higginson v Rocky Credit Union Ltd., 1995 ABCA 132 at para 6.
5 Mourant v Amherst (Town), 1999 CanLII 3303 (NSSC), 177 N.S.R. (2d) 75 (SC), [Mourant].
6 2012 CarswellOnt 9184..
7 Mourant, supra note 5.
8 Easton v Winslow Properties Corp., Ontario Superior Court of Justice, February 9, 2001 (Lederman J.).
9 Mourant, supra note 5.
10 1997 CanLII 14952 (NSSC).
11 Ibid at para 29.
12 Ibid
`3 1981), 1 C.C.E.L. 260.
14 Longshaw v Monarch Beauty Supply Co., 1995 Carswell BC 971.
15 Alishad v J.D. Collins Fire Protection Co., 2006 CarswellOnt 7285.


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