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Misconceptions of a probationary period can expose employer to liability

Most people assume that they know what a probationary period is and how it works in Canada. Unfortunately, however, there are many misconceptions with respect to the law in this regard, and many employers unknowingly expose themselves to significant liability when they hire new employees.

A recent decision of the Ontario Small Claims Court provides a timely reminder that employers and employees should take the time to properly understand their rights and obligations.

In Cao v. SBLR LLP, the plaintiff was an accountant that was let go after slightly over one month of employment. Since the offer letter provided for a 90 day probationary period, the employer proceeded to dismiss her without cause or notice. The reasons given for the dismissal were that she was not performing at the required level and that she was required to obtain her Certified General Accountant designation by the following summer, which she had advised her employer would be impossible.

There is a common misconception that every new employee is subject to a period probation. Furthermore, the common assumption is that during a probationary period, the employer can dismiss the employee without just cause, and without notice or severance. This is simply not true. While provincial employment standards legislation typically provide that notice of dismissal is not required during the first three months of employment, or something along those lines, this does not replace the common-law requirement of reasonable notice. That requirement can only be replaced by an enforceable contractual provision.

If the intention is to have a period of probation, this must be explicitly stated in the contract. Furthermore, it is not sufficient to simply confirm that there will be a period of probation; the parties must understand what this means. If the intention is that the employer can dismiss employee without cause or notice, that should be clearly stated. I have seen offer letters which simply say “probation period 3 months”; this is insufficient.

As discussed in my text, You’re Fired: Just Cause For Dismissal In Canada, even during an enforceable period of probation, the employer does not have carte blanche to dismiss an employee for any reason or in bad faith. Employers must have just cause to dismiss an employee; however, “just cause” is defined differently by the courts in this context. As stated by the Ontario District Court in 1987, in the decision of Cornell v. Rogers Cablesystems Inc., “discharge [must] be undertaken 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 dismissal.”

In the Cao case, the court noted that there was no contractual obligation for the employee to obtain the designation in question. Furthermore, the evidence was that she had only performed five tasks prior to dismissal, and had received no feedback on her work product. The Record Of Employment issued by the employer simply noted that the individual was dismissed without cause.

The court found that there was no just cause for dismissal, and further that the employee was not given a reasonable or fair opportunity to demonstrate her fitness for the position. If the employer had issues with her qualifications or work product, it should have relayed those concerns to her and given her the opportunity to respond and improve.

As a result, the employee was awarded four months of pay in lieu of notice. Which raises another common misconception: that short-term employees are inevitably only entitled to very short periods of notice. In fact, short-term employees tend to receive disproportionately lengthy notice periods, Sometimes exceeding the actual term of employment, as in this case.

Stuart E. Rudner
Rudner MacDonald LLP

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Stuart Rudner

Employment Lawyer at Rudner MacDonald LLP
Stuart Rudner is a leading HR Lawyer and a founding partner of Rudner MacDonald LLP, a firm specializing in Canadian Employment Law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is the author of You’re Fired! Just Cause for Dismissal in Canada, a textbook and database of summary dismissal cases published by Carswell. Read more
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