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Probationary periods in Canada: Are they legal?

probationary periodsProbationary periods in employment…for something seeming so simple, they still cause a lot of confusion, and employees and employers alike are frequently mistaken about the legality of probationary periods and how they apply to the non–unionized worker. Employees who are terminated during probationary periods often accept their lot without ever receiving legal advice, while employers often terminate ‘probationary’ employees without providing any compensation, only to be surprised by a demand letter or civil action claiming wrongful dismissal.

So where do these challenges come from? And how can they be remedied?

As I have written in previous posts, employment rights typically come from two primary sources: statutory rights (which have been granted through government laws and regulations); and contractual rights (which are either stated in a written employment agreement or are considered implied contractual terms by a court based on the employment relationship and common law norms). A common challenge in employment law is that these two rights are often inconsistent with on another.

Probationary periods are a good example of these inconsistencies. In British Columbia, the Employment Standards Act allows either the employer or the employee to end the employment relationship immediately without any severance or compensation within the first three months of employment. However, in Canada we typically don’t recognize an implied probationary period under contract law. This can create an difficult scenario such as the one found in Cao v. SBLR LLP[2012] O.J. No. 3328.

In Cao, a young accountant was hired by a tax firm further to an extensive interview process. When offered the job, the accountant entered into an employment agreement with the employer. The contract did state that there was a probationary period, but did not provide any language limiting severance during this time.

The accountant started her work but was let go within her first month on the job. The employer took the position that because she was terminated within the probationary period, she was not entitled to any severance. Ultimately, Ms. Cao filed a wrongful dismissal action before the Ontario Small Claims Court and was eventually awarded $20,000 in damages following trial, or 4 months wages.

So how was this possible? In this case, the employer would have complied with its obligations under employment standards law, but it continued to have a duty to provide reasonable notice of termination in accordance with contract law and common law norms. No doubt the tax firm was seeing red in writing that cheque…

Another challenge with probationary periods occurs when a contractual probationary period and employment standards don’t align. For example, it’s not uncommon for some technical or management positions to have a probationary period of 6 months or longer. It’s also not uncommon for some contracts to state that initial probationary periods can be extended unilaterally by the employer.

If we assume that the employment contracts in the previous examples are properly worded and implemented, does this mean that the employer can terminate employment summarily and without compensation 5 months into the employment relationship? Of course not. In most Canadian provinces, including British Columbia, employment standards legislation limits probationary periods to 3 months. Terminations which occur after 3 months of employment will at a minimum be subject to provincial employment standard minimums.

Conclusions

Probationary periods can be a great way for a company and an employee to assess suitability for the position. That being said, there are a few easy tips for companies to consider to make sure that they are securing the protections they are seeking in implementing a probationary period:

  1. When offering employment to a new hire, make sure to enter into a written employment agreement that clearly sets out expectations for probationary periods, including its length and what severance (if any) will be payable if the employee is terminated within this time. If the probationary period goes beyond provincial employment standards, see that it respects minimum severance amounts to ensure the contract’s enforceability.
  2. A duty of fairness continues to exist even during an employee’s probationary period. Provide adequate feedback during the probationary period and respect any company policies that may apply. Notify the employee during the probationary period of any deficiencies in their work and give the employee a reasonable opportunity to improve performance.

By: David M. Brown, Kent Employment Law

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In addition to our regular guest bloggers, First Reference Talks blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of payroll, employment and labour law, payroll, HR analytics, corporate immigration, accessibility related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post, subscribe to First Reference Talks blog to get regular updates.
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