Does an employer have the right to terminate probationary employees without pay in lieu of notice?

Question: We have a system in place where new hires are subject to a three-month probationary period. If at the end of the probationary period we decide the employee is not suitable, we terminate the employee in accordance with the legislation which states no notice payment is required. Recently a terminated probationary employee claimed he never agreed he was on probation and expects to receive a severance package. Doesn’t the employer have the absolute right to terminate in the first three months without pay in lieu of notice?

Answer: Many employers wrongly believe they can terminate an employee within the first three months without any obligations to the employee. But in the absence of a clear written contractual provision, or a policy clearly acknowledged by the employee to the contrary, employees are not subject to a probationary period. This means that upon termination during the probationary period, the employee would be entitled to reasonable notice of termination or pay in lieu of notice.

It is important to remember the provisions of Ontario’s Employment Standards Act, 2000, merely prescribe minimum standards. You are correct in noting the legislation does not require notice to be paid to a dismissed employee until after the employee has completed three months of employment. But the civil courts are considerably more generous than the legislative minimum requirements.

Therefore, in the absence of an agreed probationary period, a civil court would determine what notice was reasonable to the dismissed employee in all of the circumstances taking into account the employee’s length of service, age, the nature of the position and the employee’s ability to find other employment in the marketplace.

If you want a probationary period, employees should be signing written employment contracts before the start of the employment relationship. That contract would contain a probationary period that would expressly allow the employer to terminate the employee at any time, and for any reason, within the first three months of employment without having to provide any notice or pay in lieu of notice.

If you wish to have a probationary period that is longer than three months (typically six months is the longest) this can be done but the ESA, 2000, would require the employee receive at least one week notice (or one week pay in lieu of notice) if the employee was terminated after three months but within the six-month period.

Peter Israel is counsel to Goodman and Carr LLP in Toronto and is head of the firm’s Human Resource Management Group. Peter can be reached at (416) 595-2323.

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