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Probationary period ― a complex human resource topic

Probationary period ― a complex human resource topic

By Yosie Saint-Cyr, LL.B., Managing Editor, HRinfodesk.com---Canadian Payroll and Employment Law News, August 2011

Probationary period-a complex human resource topic because many employers still are under the assumption that rules governing the probationary period are found under employment/labour standards legislation, as per some of the poll comments received following our last poll asking readers three very important questions: 1. What length of probationary period do you impose on new hires? 2. Do you conduct performance evaluations on probationary employees? and, 3. If so, how do you deal with underperforming probationary employees?

1. What length of probationary period do you impose on new hires?

The topic of probationary periods is not covered under employment/labour standards legislation in any jurisdiction in Canada, and to be legal it must be evidence in an offer of employment, an employment contract or probationary agreement before the employee starts work.

The common law provides employers with the ability to hire an employee on probation if certain steps are taken to establish and define the probation period. The common law does not impose any limit on how long a probationary period may be. Many businesses make an offer of employment conditional on the prospective employee agreeing to a probationary period of usually three months to give the employer time to train the employee and evaluate his or her suitability for the job. Agreements of this kind generally provide that if an employer is dissatisfied with the employee's performance, it can dismiss the employee at any time before the end of the probationary period without notice or compensation in lieu of notice because in most jurisdictions, employment/labour standards legislation allows an employer to dismiss an employee without notice when the employee has worked for three months or less. Given the interplay between the common law and the Act, probationary periods will generally run for three months. Usually the duration used for a probationary period.

According to question 1, on this three-part poll, the majority of respondents require a three month probationary period.

The duration of the probation period and termination provisions must be included in the offer of employment or employment contract. Employers should be aware that a probation "policy" will not necessarily bind the employee. If the policy is not made a binding element of the employment contract, it will be of little value.

If the employee accepts an oral or written offer of employment that does not specify a probationary period, then the deal has been made and no probationary period applies.

Employers must be totally clear about what kind of notice will be given to the employee if they are terminated before the end of the probation period, whether the probation is for three months or extended to six months. Please note that any extension of the length and terms of the probation period must be in writing and distinct from the original probation agreement.

Although probation itself is not covered by provincial employment standards legislation, employers that want to dismiss a probationary employee should note that employees, whether on probation or not, may be entitled to at least one week's notice of termination of employment if they have been working for their employer for three months or more (even if on probation of three months or less), depending on the jurisdiction. Employees whose employment is terminated while they are within the company's probation period are still entitled to vacation pay and lieu of notice pay if they meet the requirements outlined in the provincial/territorial legislation.

As a result, the employer and employee should agree, in writing, prior to the commencement of the employment, on the terms of a binding probationary period. The length of the probation period should be clearly stated. The period should be defined as time worked rather than just the passage of calendar time (because time on the job is what's required to assess the individual's suitability for continued employment).

The probation clause should also provide the employer with a grace period after the expiry of the probation to review the employee's performance and make a final decision. This gives the employer a little breathing room and protects it against a finding that the period has expired and the employee has reverted to regular status.

2. Do you conduct performance evaluations on probationary employees?

Out of 298 respondents, more than the majority (80.20 percent) conduct performance evaluations of probationary employees.

The parties should define the standard of review (the most common standard is suitability). Because such standards tend to be somewhat hazy, the parties should then go a step further and set out the primary criteria on which the employee will be measured during the probation period.

These might include, for instance, compatibility with co-workers, ability to follow directions, demonstrated progress in acquiring the necessary skills of the job, overall efficiency and output, adherence to company policies, etc. There is really no limit on the range of criteria that might be utilized.

Employers must be totally transparent with employees about probation period expectations. Let the employee know what you want them to achieve during the probation period and under what time frames. The onus is on the employer to address concerns with a new employee as soon as the problems arise, and the employer must ensure the employee had everything they needed to function and perform their duties. The job performance must be truly and carefully assessed. Thus, the employer must have justification to support a decision not to retain an employee during a probation period.

Documentation should be kept, during the probation period, of the employee's progress in relation to the agreed-upon criteria. A good rule of thumb is that there should be two interim reviews of the employee's performance and conduct.

During these reviews, the employer should be pro-active in counseling the employee on her shortcomings. This eliminates surprises when the final review is performed.

Specific instructions should be provided to the employee on achieving the desired standard. All of this should, of course, be documented for later use.

The employer should provide assistance to the employee in resolving any performance and conduct problems which crop up during the probation period. It is important that the employer not be viewed, later, as an obstruction to the employee's successful completion of the probation period.

The employer should conduct a final review, making a reasonable decision about the employee's employability. Common law decisions indicate employers should, to whatever degree is possible, apply objective criteria in performing a good faith assessment of the probationary employee. An arbitrary, off-the-cuff decision definitely won't withstand the scrutiny of a court.

The use of a pre-designed probationary review form will help give the process a more structured appearance. Nothing on the form, of course, should come as a surprise to the employee (you don't want to give a court the impression the standards were sprung on the employee afterwards).

An employer following all these steps will find itself in a much improved position to defend against claims by dismissed probationary employees.

3. If so, how do you deal with underperforming probationary employees?

When dealing with an underperforming probationary employee, most employers either extend the probation period (49.08 percent) or dismiss the employee due to failure to perform up to expectations (42.80 percent). No surprise there.

As stated by some of the comments:

  • When a probationary employee is not performing, we will either let them go or, if we think it can still work out, put them on a Performance Improvement Plan or an informal equivalent.
  • I believe we should release the new hired if he/she failed to pass the probation. However, it depends on the concrete situation: if the objective condition is part of the reason, we may extend the probation period; or just let it pass if it is reasonable.
  • In dealing with underperforming employees during their initial probationary period, we may terminate or extend probation period depending on the circumstances.

When the employer wishes to extend the duration of the probationary period, if training and familiarization is expected to take longer, a period of probation can exceed three months as long as the new probationary agreement distinct from the initial one states clearly the new duration, the new or current terms and that the employee will receive notice or pay in lieu of notice that meets or exceeds the statutory requirement. A contract that does not satisfy the legislated minimum will not be enforceable.

Even if the employer has specified that the employment be subject to a probationary period, how it has been imposed will scrutinize if the terminated probationary employee decides to sue. Note that probationary employees are not disqualified from taking civil action for wrongful dismissal.

An employer must act in good faith. An arbitrary imposition of termination, not consistent with the true intent of the probationary term, will not be lawful. The employer could be found to be liable for termination pay and possible punitive damages.

The onus will be on the employer to prove that it terminated the employment of a probationer for cause. Where the employer does not prove that the employee was a probationer dismissed for cause, it will be liable to provide notice or compensation in lieu of notice.

If wrongful dismissal actions are to be avoided, the employer should ensure that any termination of a probationary employee is conducted fairly and reasonably. When an employer wants to terminate an employee during the probation period, the employer must show that he or she acted fairly and with reasonable diligence in determining whether or not the employee was suitable in the job for which he or she was hired and being tested.