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Don’t assume all employees have probationary periods

Employers that dismiss workers during first 3 months without pay can face liability for wrongful dismissal

By Stuart Rudner

There is widespread confusion regarding “probationary periods” in Canada. Many employers, HR professionals and employees assume every new hire automatically has a probationary period.

But there is no such rule. Employers that dismiss workers during the first three months of employment and assume they have no obligation to provide them with notice of dismissal or pay in lieu thereof can face liability for wrongful dismissal.

Employment standards legislation across the country sets out the minimum amount of notice of dismissal or pay in lieu thereof to be provided to employees. These amounts are based solely upon an individual’s length of service. Ontario, for example, does not require any notice during the first three months of employment.

However, the common law requires that employers provide “reasonable notice” of dismissal. Reasonable notice is assessed based upon a number of factors, including an individual’s length of service, position, character of employment, age and anything else that the courts deem relevant.

The common law applies at all times, including during the first three months of employment. The only way to avoid it is to enter into an enforceable employment agreement that contains specific provisions setting out the amount of notice to be provided in the event of dismissal without cause. Without getting into exhaustive detail, it is important for employees to remember that once a verbal agreement has been entered into, it’s extremely difficult to replace it with a written agreement.

Many employers still make the mistake of verbally offering to hire an individual, having them accept the offer, and then asking them to sign a written employment agreement when they show up for their first day of work. At that point, there is already a verbal agreement in place. The best practice is to advise the individual the organization would like to hire them in accordance with the terms and conditions set out in a written contract of employment (and accompanying policy manual) and then providing those documents to the individual. The employer should then allow the individual sufficient time to review the offer and obtain independent legal advice if they choose. There should be no agreement, verbal or otherwise, until that offer is signed back.

I have seen some contracts of employment that contain wording along the lines of “there will be a three month probationary period.” While the employer may assume this is effective, it is ambiguous to the point where courts will not enforce it. Simply put, there is no indication as to what the terms of the probationary period will be. In order to have an effective probation clause, the terms must be set out in detail. If it is the intention of the parties, it should be made clear the employer will be at liberty to dismiss the employee during the first three months of employment without any obligation to provide notice of dismissal or pay in lieu thereof.

The same approach can be used to clearly set out the employer’s obligations in the event of dismissal without cause at any time. So long as the amount of notice is not less than that set out in the applicable legislation, then the parties are free to replace the common law requirement of reasonable notice as they choose.

As with many issues employers face, having an enforceable, well-drafted contract of employment will be extremely valuable in allowing employers to minimize their obligations, reduce uncertainty and maximize their HR efficiency.

Stuart Rudner is a partner with Miller Thomson LLP in Ontario, specializing in employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or srudner@millerthomson.com. You can also follow him on Twitter @CanadianHRLaw, join his Canadian Employment Law Group on LinkedIn, and connect with him on Google+.

Stuart Rudner

Stuart Rudner is a founding partner of Rudner MacDonald LLP in Toronto. Follow him on Twitter @CanadianHRLaw. He can be reached at srudner@rudnermacdonald.com.
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