Perspective on the Probationary Period and Termination Rights in Ontario

 

Employers often use the term “on probation”. Today we explore what that means from a legal perspective and how this concept affects the employer’s and employee’s rights on termination.

What is a Probationary Period and is it Legal in Ontario?

In the employment context, a probationary period is widely understood to mean the initial period of an employee’s employment during which time certain special terms may apply. Generally, the intention and purpose of the probationary period is to provide the employer with an opportunity to assess the employee’s suitability to the job and the workplace, at lower stakes. For example, the entitlement under the company benefit plan may not vest until the probationary period has expired.

Statutorily speaking, the Employment Standards Act, 2000 of Ontario (the “Act”) provides that an employer shall not terminate the employment of an employee who has been continuously employed for three months or more, unless the employer has provided written notice or pay in lieu of notice in accordance with the Act.[1]

This three-month window, during which notice or payment in lieu thereof is not statutorily required, is often referred to as the “probationary period”. However, there is no explicit definition provided in the Act, which means that:

  1. there is no such thing as an “automatic probationary period”;
  2. the length of a probationary period can be contractually agreed to by the employer and employee; and
  3. subject to the termination notice caveat, all of the standards in the Act come into effect as of the employee’s first day on the job.  

Following this initial three-month period, the notice of termination requirements set out in Section 57 of the Act are applicable, whether or not the parties have agreed to a longer probationary period by way of contract.  

The Treatment of the Probationary Period at the Common Law is Different than under the Act

The Act provides those minimum standards that employers must adhere to, but the common law often imposes higher standards, particularly in the context of termination. In addition to the employer’s statutory responsibilities, under the common law, the employer: 

  1. owes the employee on probation a duty of fairness and the employer must provide the employee with a fair opportunity to demonstrate his or her ability on the job;
  2. must act in good faith during the employment relationship and at termination; and
  3. is required to honestly perform its obligations under the employment contract.

Importantly, with respect to termination, there is no common law exemption to provide reasonable notice on termination, regardless if the termination occurs in the first few months of employment or thereafter. In the absence of explicit language in the employment agreement, an employee on probation may be entitled to notice on termination in accordance with the common law “reasonable notice” analysis. The case law in this area has generally evolved to provide more protection to probationary employees, particularly where there is no employment contract or in the face of ambiguous wording in the termination provisions of an agreement.

A Comprehensive Contract – The Takeaway for Employers

The takeaway for employers is that if they wish to provide for a probationary period, with no obligation to provide notice or pay in lieu thereof during the first three months of employment, then this should be clearly set out in the employment agreement. The employment agreement should:

  1. describe the length of the probationary period; and
  2. set out the amount of notice or pay in lieu to be provided in the event of termination (which cannot fall below the statutory minimums).

Neither employers nor employees should underestimate the power of an employee’s common law remedies, even if the employee is “on probation”. A carefully drafted employment agreement that contemplates the possibility of termination during the probation period will go a long way in creating certainty, both during the employment relationship and at termination.

 

Cassandra Da Re is a Corporate and Commercial Lawyer at Dale & Lessmann LLP, Toronto, Ontario, Canada, a full service business law firm. To speak to Cassandra please call 416-369-7843 or send an email message to her at cdare@dalelessmann.com.

 

[1] For a further review of the judicial treatment of the provisions of the Act in connection with an employee’s probationary period and termination, please see the following blog: Employment Probationary Period – Terminations.