November 15, 2022

Probationary Periods

One persistent misconception about employment relationships is that a 3-month trial period, during which the employer is free to terminate without notice, is implied.

In Ontario, the Employment Standards Act, 2000 does not mandate notice of termination or termination pay for employees with less than 3-months’ service. The bare minimum entitlement to 1-week of notice or termination pay is effective only after 3-months of service.  

This does not mean, however, that employers automatically have the right to end employment for a person with less than 3-months’ service, without notice. To do so, the employer must include this is a term in a written contract of employment, and the employee must agree to it, before the relationship starts. 

Also, even though an employer may not be required to provide termination pay during that time, they are still legally bound by a duty of good faith towards the employee. Treatment of a probationary employee in a manner that is arbitrary, discriminatory or otherwise harsh can result in liability to the employer.  

A recent decision out of British Columbia illustrates the risks of releasing very short service employees.

The Case

Tessema v. Nemesis Coffee Holdings Ltd., 2022 BCCRT 1113 concerned a delivery driver who worked a single day before his employment was terminated. While he was terminated without cause, the employer alleged that this was done to spare his feelings. According to the employer, the employer performed poorly on the shift and ongoing employment was infeasible.

The employer had offered employment without a written employment contract, and there was no mention of any probationary period in any of the correspondence between the parties. Moreover, while the employer says they did not fire Mr. Tessema for cause to spare his feelings, they also did not submit any evidence demonstrating any sort of just cause rationale behind his termination.

Mr. Tessema’s claim was for 4 weeks’ pay in lieu of notice, as it took him nearly a month to find new employment. Legally speaking, Mr. Tessema was obligated to mitigate his damages (minimize his losses) by looking for new work, but the employer never sought any evidence as to the progress of his subsequent job search. 

Absent a written employment contract, Mr. Tessema’s damages would be assessed according to the common law. He was only 32 years old, working as a delivery driver for $20 per hour, and theoretically should have been re-employed elsewhere fairly quickly. However, the Tribunal looked at other decisions of short service employees and found that a short period of employment is simply not a barrier to pay in lieu of reasonable notice.

The Tribunal ultimately awarded Mr. Tessema 3 weeks’ pay, or $1800 dollars, plus $13 in interest. The Tribunal ruled against Mr. Tessema’s claim for a $60 reimbursement for his criminal background check though, ruling that the scan was a necessary precondition of his employment.

The Upshot

Employers can terminate employment without notice during a probationary period, provided this is an express term and condition of a written employment agreement. Probationary periods are not implied.  

As we can see from this BC decision, an employee who works a single day can still be entitled to compensation in lieu of notice of termination. Proceeding on the assumption that a relationship can be summarily terminated can leave you exposed to a legal claim for wrongful dismissal. 

The solution for avoiding liability is simple, though: Outline a probationary period in your employment agreement.  

In addition, ensure that your obligations on termination are limited to the statutory minimums.  

Caution is warranted here, though. Many employment agreements appear to be limited to the statutory minimums but contain language that courts have considered defective. Have an experienced employment lawyer review your contract template to ensure that it is valid. In most cases, a few simple changes are necessary and will save you thousands, not to mention the frustration and cost of dealing with a legal claim.   

Wise employers will also give probationary employees a fair chance to succeed. The Employer’s duty of good faith and fair dealing continues to evolve and while there is still wide liberty to dismiss, a cautious approach never creates liability. The old adage “hire slow, fire fast” should always be followed by “but not without a fair shot.”

Lastly, consult an employment lawyer. Acting out of instinct on information based on misconceptions is a precursor for frustration and unanticipated cost. We will help you review your circumstances, and provide advice that helps protect your business. Contact our office today to set up a consultation.