Minimum length to justify probationary period?
Question: Can there be a probationary period for a fixed-term contract? If so, is there a minimum length
the contract should be to justify a probationary period?
Answer: Yes, there can be a probationary period for a fixed-term contract, and no, there is no minimum contractual length.
We know that employers encounter difficulties at times when they enter into a fixed-term contract and later do not have just cause to bring the employment relationship to the end. Unless the parties have agreed otherwise, if the employer terminates a fixed-term contract, it will be liable for the employee’s compensation and benefits for the balance of the fixed term, and that liability will not be subject to mitigation by the employee. Therefore, fixed-term contracts should include a term stipulating that the agreement ends at the earlier of: the expiry of the term, or the provision of a specified period of notice (or payment in lieu) by the employer prior to the end of the term. (Howard v. Benson Group Inc.: “Of course, parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of notice or payment in lieu.”)
Similarly, probationary periods during a fixed-term contract can be helpful and are also legally acceptable. However, employers recognize that insisting upon a probationary period for someone hired after an extensive process may not be realistic.
In any event, if a probationary period is agreed to and included in a fixed-term contract, there is no minimum length of contract required to justify a probationary period.
Having said that, courts have subjected probationary periods to increased scrutiny. Courts will now require that any decision to terminate during the probationary period be based on a good faith assessment of compatibility. (Stacey Ball, Canadian Employment Law, citing Regan v. Chaleur Entrepreneurship Centre Inc.).
The vigour with which this assessment is sometimes done, however, suggests an expectation approaching “just cause” before the probationary employee can be summarily dismissed. Moreover, recent decisions suggest that, absent actual just cause, even a valid probationary period does not allow an employer to terminate employment during that period without notice if employment standards legislation stipulates an applicable, overlapping minimum notice period. In Ly v. Interior Health Authority (suggesting this without deciding it, as the terms were found not be incorporated into the employment contract: “I would simply question, without deciding, the validity of employment policies that attempt to circumvent the application of statutory entitlements in the ESA during the course of probationary periods.” The B.C. Supreme Court accepted that this was an unsettled area of law. The employer in Ly argued that “suitability” was the basis for “just cause” in the probationary context, or alternatively, that probationary periods should be treated as fixed-term contracts.
As a result, there is a growing movement away from traditional probationary approaches with no compensation owing for both fixed-term and indefinite-term contracts. Stipulating in the employment contract that the employer reserves the right to bring employment to an end if the individual is “unsuitable in the employer’s view” during the statutory or even longer probationary period accompanied by sufficient minimum payment to satisfy employment standards obligations is worthy of consideration. As always, these termination clauses should be carefully drafted.
For more information see:
• Howard v. Benson Group Inc., 2016 CarswellOnt 5382 (Ont. C.A.).
•Regan v. Chaleur Entrepreneurship Centre Inc., 154 NBR (2d) 361, 1994 CarswellNB (N.B. Q.B.).
• Ly v. Interior Health Authority, 2017 CarswellBC 37 (B.C. S.C.).
