Recent decision highlights perils of carelessly drafted policies, agreements
A recent decision from P.E.I. is a good example of what can happen when employers unintentionally impose more obligations on themselves than they are legally required to.
We see this in many contexts, but in this case, they limited their rights with respect to a probationary employee by carelessly drafting the probationary clause.
The applicant was hired by iWave Information Systems on Nov. 10, 2014, as its marketing and communications manager. The offer of employment stipulated:
“Your employment will be probationary for the first 3 months... When a termination of employment is necessary, the employee will be given a letter detailing the reason for termination. This letter will also detail the process (return of equipment, payout of commissions, etc.) that will be followed as part of the termination.”
On Jan. 15, 2015, two weeks before the end of the probationary period, iWave terminated the manager's employment. The termination letter stated: “I regret to advise that we do not wish to continue beyond your three-month probationary period and your employment with iWave Information Systems Inc. (iWave”) is terminated, effective today… Please sign this letter and return it to me within seven days.”
The manager brought an action for wrongful dismissal against iWave, claiming breach of contract and breach of common law obligations. In his claim, he argued that he was not given any reasons for his termination nor was he given an opportunity to address any issues.
The trial judge found that iWave complied with its contractual obligation to give detailed reasons for termination. He stated that the letter was terse but it did comply because it referenced the probationary period and indicated to the manager that it did not wish to employ him beyond the probationary period. The trial judge concluded that was the reason for his termination.
The trial judge then dealt with the issue of whether there was a breach of common law employment obligations. He followed the principles set out in the case of Alexander v. Padinox Inc.:
- An employer must show cause to justify the dismissal of a probationary employee.
- Cause for a probationary employee is a lower standard than what is required to terminate a permanent or regular employee.
- The employee must be given a reasonable opportunity to demonstrate ability, with respect to the reasonable standards of conduct or performance imposed by the employer.
- The employer has to show that its assessment of the probationary employee’s suitability for the position was fair and reasonable.
He found that in this case, unsuitability for the position was sufficient, and iWave reasonably and fairly reached that conclusion by taking various opportunities to assess the manager’s performance and provide him with feedback.
As such, the trial judge found that iWave was not in breach of the contract of employment or the common law, and his action was dismissed. The manager appealed the decision to the Prince Edward Island Court of Appeal.
The court disagreed with the trial judge and found that the termination did not comply with the requirements of the employment contract because iWave did not provide any reasons for the termination. The court stated that neither the manager "nor anyone else would know from the letter the reason for termination.”
Having decided that iWave was in breach of the employment contract because it did not provide detailed reasons for the dismissal, the court awarded damages in the amount of $15,625, representing three months’ pay in lieu of notice.
It is surprising how often employers make their lives more difficult than they have to be. We routinely see harassment policies that require investigations to be concluded within, for example, seven days, or be conducted by the director of human resources.
We also regularly see discipline policies that needlessly remove the employer’s discretion to impose discipline commensurate with the situation, requiring instead a step-by-step disciplinary process that does not allow for any discretion.
And in the case reviewed above, we see that iWave carelessly included wording in its probation clause that required it provide “detailed reasons” when dismissing a probationary employee, when it would otherwise not be required to do so.
This should be a reminder to carefully draft all contracts and policies, and to avoid mindlessly using templates or precedents.