The legal effect of a probationary clause in an employment contract can be unclear depending on the facts of the case. The Supreme Court of British Columbia recently addressed probationary clauses in employment contracts in Ly v British Columbia (Interior Health Authority) (2017 BCSC 42).
The plaintiff, PY, was hired by the Interior Health Authority (IHA) as the manager of quality and patient safety and client experience, and moved from Vancouver to Kamloops for the position. The offer of employment contained the following clause: "Employees are required to serve an initial probationary period of six (6) months for new positions."
PY's employment was terminated before he had completed this probationary period. Relying on the probationary clause, the IHA took the position that reasonable notice was not required under common law.
There were several issues before the court, including whether employers can enforce a probationary period longer than the minimum articulated by the Employment Standards Act and whether such clauses breach the act. In British Columbia, Section 63 of the act does not require employers to give notice of termination of employment to an employee who has been employed for less than three months. However, if an employee has been employed for more than three months, statutory and common law notice requirements apply.
The court confirmed that the common law presumption of reasonable notice may be rebutted where parties have expressly agreed to some other period of notice. Any agreement that purports to rebut this presumption must be clear and unequivocal. The effect of such an agreement is that during this probationary period, the employer has an implied right to dismiss the employee without notice, as long as it acts in good faith.
However, the court noted that an express probationary period cannot contravene statutory entitlements under the Employment Standards Act and the common law will not imply a term into a contract that is inconsistent with legislative requirements. The court held that the terms of PY's probation did not breach the requirements of the act.
The court explained that a probationary period is best understood as part of an employment contract in two contexts:
- The employee is held to the requirement that, for a specific period, he or she must demonstrate certain suitability requirements set by the employer; and
- The employee may be dismissed without reasonable notice (subject to statutory minimums) if he or she does not meet suitability requirements. If the employee is found to be suitable for the position, then once the probationary period is complete, the contract continues as an employment contract with the requirements of just cause and reasonable notice.
The court held that PY's employment contract included both an express probationary term of six months and an implied term that the IHA had a right to dismiss him during his probation without notice, as long as it acted in good faith in its assessment of his suitability.
In determining whether an employer has acted in good faith, a court will review several factors, such as whether:
- the probationary employee was made aware of the basis for the employer's assessment of suitability before or at the commencement of employment;
- the employer acted fairly and with reasonable diligence in assessing suitability;
- the employee was given a reasonable opportunity to demonstrate his or her suitability for the position; and
- the employer's decision was based on an honest, fair and reasonable assessment of the employee's suitability.
The court held that PY was not given a fair opportunity to demonstrate his suitability for the position and that the IHA did not clarify the expectations of his position. Consequently, the court found that the IHA did not meet its legal obligation to carry out a good-faith assessment of PY's suitability. As such, the court found that PY was wrongfully dismissed and awarded him a three-month notice period.
Employers in Canada must be aware of the requirements under applicable employment standards legislation regarding when notice of termination or pay in lieu is owed to the employee. Under the British Columbia Employment Standards Act, once an employee has been employed for three months, he or she is entitled to notice of termination even if the probationary period in the employment contract extends past three months. Longer probationary periods, such as the six months in PY's case, will not limit the employee's Employment Standards Act entitlements.
Further, employers terminating an employee's employment during a probationary period have an obligation to assess the employee's suitability for the position in good faith. An employer that fails to do so may be found to have wrongfully dismissed an employee and required to pay damages.
For further information on this topic please contact J Alexandra MacCarthy at Fasken Martineau DuMoulin LLP by telephone (+1 604 631 3131) or email ([email protected]). The Fasken Martineau DuMoulin LLP website can be accessed at www.fasken.com.
This update was reprinted with permission from Northern Exposure, a blog written by lawyers in the labour, employment and human rights group at Fasken Martineau, and produced in conjunction with HRHero.com.