The recent decision of the Ontario Divisional Court in Nagribianko v Select Wine Merchants Ltd. reminds employers that probationary periods can give them a real opportunity to determine the suitability of an employee for employment.
Mr.Nagribianko commenced employment with Select Wine Merchants (Select) on May 27, 2013, pursuant to a written contract of employment, which included a six month probationary period.
Believing him to be “unsuitable for regular employment,” Select terminated Mr. Nagribianko’s employment on November 21, 2013 (within the six month probationary period). Mr. Nagribianko subsequently commenced an action claiming that he had been wrongfully dismissed.
Although both parties agreed that the employment contract provided for a six month probationary period, they disputed the legal effect of the probationary period.
The employer argued that the legal effect of the probationary period was set out in its employee handbook (referenced in the employment contract), which purported to limit the employee’s rights on termination to the statutory minimums.
However, the Deputy Judge found that at the time when the employment contract was signed, Mr. Nagribianko had not received a copy of the handbook. Accordingly the employee was due “reasonable notice” of termination at common law. Consequently, the Deputy Judge found that Mr. Nagribianko was entitled to damages equal to four months’ salary and benefits, noting that Select had “induced” Mr. Nagribianko away from secure employment.
Select appealed the Deputy Judge’s decision.
In overturning the decision, Justice Sanderson held that, unlike a non-probationary employee, the standard for dismissal of a probationary employee is “suitability” and states:
“Where the employment of a probationary employee has been terminated for unsuitability, the employer's judgment and discretion in the matter cannot be questioned. All that is required is that the employer show that it acted fairly in determining whether the probationary employee was suitable and that he/she was given a fair opportunity to demonstrate his/her ability.”
This statement has been developed into a three-part test.
- Did the employer set job performance criteria that were reasonable in connection to the employment?
- Did the employer inform the probationary employee of these criteria and allow him or her fair and reasonable opportunity to satisfy the criteria?
- Did the employer meet with the employee to discuss job performance?
If the answer to all of the above is “yes”, then the common law presumption is rebutted and replaced with the terms set out in the probationary clause.
Consequently, given that it was not necessary for Mr. Nagribianko to refer to the handbook to know that his employment was subject to a probationary period and that, according to the clause, Select was entitled to terminate Mr. Nagribianko’s employment without notice, it was not necessary for the court to determine the period of reasonable notice.
The Employment Standards Act (“ESA”)
Given that Mr. Nagribianko’s employment was terminated after more than three months of employment, the ESA provisions relating to termination notice were in effect. It is arguable that the probationary clause violated the ESA, which should have led to the entire provision being void causing Mr. Nagribianko to become entitled to common law reasonable notice. This was not an avenue that Justice Sanderson explored.
Another interesting portion of the judgment comes in a single sentence near the decision’s conclusion, where Justice Sanderson states:
“Probationary employment, on its face and by its nature, is inconsistent with any inducement or promise of long-term employment.”
- There Must Be Express Agreement To The Probationary Period.
Employers are commonly under the opinion that a probationary period automatically exists for every new hire as an implied term in their employment contract. This is not true. Since such a probationary clause takes away an employee’s common law rights, it must be expressly agreed to by the employee.
Moreover, to be relied upon, the clause must be clear and unambiguous. To this end, it should spell out that it is meant to be a period when the employee demonstrates his or her “suitability” for permanent employment.
- A Probationary Period Must Not Violate The ESA.
The common law does not impose any limit on the duration of a probationary period and courts will respect probationary periods of reasonable length. However, employers should be careful that the duration of the probationary period does not attempt to “contract out” of the ESA.
Employers frequently choose a three-month probationary period because during this period, the employee is not entitled to statutory notice. If an employer opts for a longer probationary period, the minimum notice requirements for termination of employment under the ESA become operative and need to be specifically stated in the contract, otherwise the probationary period may be viewed as an unlawful contracting out of the ESA.
- A Well-drafted Probationary Clause May Be An Effective Tool For Rebutting Claims of Inducement
As Justice Sanderson ruled, an employee’s argument that he or she were induced away from secure employment with promises of equally secure employment only to find their employment terminated may be effectively rebutted by a contractual agreed to probationary period.