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Terminating Probationary Employees – More Potential Pitfalls Than You’d Think

Employers must always be cautious about how they handle the delicate situation of terminating an employee, even in situations where it is a probationary employee who is new to the company.  While a terminated employee who has served less than three months with a particular company has no defined right to notice or pay in lieu of notice in the Employment Standards Act legislation, employers should nonetheless be aware that the common law is often much more generous to employees.  If not careful, employers could face potentially costly litigation and payouts to former employees.

For example, in Oakley v. Astra Pyrotechnics Canada Ltd., 1989 CarswellOnt 774, a secretary was fired without cause after just over one month on the job.  There were no allegations of bad faith or discrimination on the part of the employer.  The employer was simply forced to let her go as a result of the company’s failure to acquire a lucrative contract they were expecting to receive.  Nonetheless, the court found that this was a wrongful dismissal.  Notwithstanding her probationary status, the employer was not entitled to dismiss her without cause.  The court determined that she was entitled to the cash equivalent of four months of pay.

A similar situation transpired in Cao v. SBLR LLP, 2012 CarswellOnt 984, where a probationary employee was terminated after just over a month of service and given 4 months’ worth of pay by the court for wrongful  dismissal.  At trial, the employer alleged several deficiencies in the employee’s competencies.  However, these were rejected by the court on the basis that the Termination Letter provided to the employee made no mention of cause, combined with the fact that the ROE (record of employment) stated that she was terminated “involuntarily without cause.”  The court determined that once the termination document is issued to the employee without citing any just cause, no such cause can be subsequently asserted by the employer, unless such just cause is an after-acquired just cause which was not known or could not reasonably have been known or discovered by the employer at the time of termination.

Dismissal without cause or appropriate notice may be an issue even where the employment contract explicitly allows for it during a probationary period.  In Webb v. Capable Building Cleaning Ltd., 1992 CarswellNB 383, the court found that notwithstanding the written agreement that the employee may be terminated without cause during the probationary period, the employer acted in a manner that was unfair, arbitrary and unreasonable, and awarded 2 weeks of pay to the employee.

It should also be noted that, if an employer is not careful, a probationary clause in a written employment contract may be entirely invalid.  In Rejdak v. Fight Network Inc., 2008 CarswellOnt 4521, the employee was hired over the phone and accepted the employment offer.  He resigned from his current employment and went to his new job on Monday.  He performed a few tasks before being given a written employment contract to sign, which he did.  The written contract contained mostly the same terms discussed over the phone, but also contained a probation clause, which was not discussed over the phone.  The court held that the oral contract generated by the phone call was the governing contract and superseded the written contract.  The written contract was deemed invalid due to the legal principle that a contract must have consideration (a benefit to each party).  The written contract merely added an unfavorable condition to the employee’s existing employment contract without any additional benefits to the employee beyond what was present in the oral contract and was consequently deemed to lack consideration.

The wisest course of action for an employer wishing to terminate a probationary employee would be to allow the employee a reasonable opportunity to demonstrate suitability for the position, and then allege that he/she is unsuitable for the position.  The employer is allowed significant discretion in determining suitability, as long as the organization comes to the conclusion that the employee was not suitable in a reasonable manner.  The following points taken directly from Mison v. Bank of Nova Scotia, 1994 CarswellOnt 989 are instructive:

  1. The onus is upon an employer to show that it has “just cause” to discharge even a probationary employee;
  2. “Just cause” may be that the employee is, in the opinion of the employer, unsuitable for a job;
  3. The unsuitability which would justify the termination of a probationary employee may go beyond those grounds which might support the discharge of a regular employee, and may include such considerations as character, compatibility, as well as ability to meet the present and future production standards expected by the employer…;
  4. Where a probationer has been terminated for unsuitability, the employer’s judgment and discretion in the matter cannot be questioned, …
  5. All of the foregoing is subject to the requirement of the employer showing that the discharge was in the bona fide exercise of the employer’s discretion and judgment that the employee was not suitable and not for some other reason or improper motive which would not justify a dismissal.

Ultimately, every employment relationship is unique.  The information above does not enumerate all the pitfalls that may befall an employer when terminating a probationary employee.  It is always best to seek legal advice from an employment lawyer before attempting to end an employment relationship.

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