Sentenced to Probation: How Employers Can Protect Themselves When Terminating the Employment of Recent Hires
In the recent decision in Van Wyngaarden v. Thumper Massager Inc., the Ontario Divisional Court confirmed the enforceability of probationary periods in employment agreements.[i] Employers who seek to impose more rigorous oversight of new employees and minimize termination obligations to those employees can rely on appropriately drafted probationary limitations in their offers.
The Employment Agreement
The Employee accepted a one-page offer of employment (the “Employment Agreement”) with the Employer on April 7, 2015. The Employment Agreement included terms that had been previously discussed with the Employee, such as his duties and responsibilities, but also included a probation clause which had not been previously discussed. The probation clause stated the following:
There is a 6-month probation period associated with this role. During this time
we will review your performance and development. This work offer will
automatically become permanent upon successful completion of your probation
period. Your professional performance and compensation package will be
reviewed yearly, every July.
The Termination Dispute
The Employer terminated the Employee’s employment on October 5, 2015, within the 6-month probation period, on a without cause basis and with one week’s pay, as required by the Employment Standards Act, 2000.
The Employee argued that he was not subject to a probationary period, and the Employer failed to meet its obligations for terminations within the probationary period. Specifically, the Employee argued that:
the probation clause had not been drawn to his attention;
he signed the Employment Agreement believing it to be a formality; and
the Employer had terminated his employment in bad faith and did not provide him with a fair opportunity to demonstrate his skills.
The Court dismissed all the Employee’s arguments and upheld the motion judge’s finding that the probation clause was enforceable. The Court found that “a person who signs a contract is taken to have read the contract he or she signed and to have agreed to its terms.” The Court noted that the Employment Agreement was only one page long, and the probation clause was a stand-alone paragraph in the middle of the page. Further, the Employee provided little evidence of an ulterior motive for terminating him, other than his own assertions. The Employer provided the Employee almost six full months to demonstrate his suitability for the position.
PH Takeaways
If you wanna rely on it, it’d better be in writing: There is no automatic, unwritten employment probation period. If the probation period is not set out in a written employment contract (or collective agreement), either as a stand-alone reference or in a termination provision, then there is no presumptive period.
Sync things up: Some contracts have separate references to probation periods and termination entitlements. To the extent that there is any inconsistency between the probation and termination language in a contract, it could mean that either or both provisions are unenforceable. Ensure that these provisions are in sync.
Flex your probationary authority: If employers wish to rely on a probation period limitation, they should provide explicit feedback to employees about their performance during that period. Documenting issues with “suitability” and giving notice of such issues to the employee are important in thwarting a claim of bad faith. As noted in Nagribanko (affirmed by the Ontario Court of Appeal and cited in Van Wyngaarden), employers must give new employees “a fair opportunity to demonstrate suitability for permanent employment [including] considerations of the probationary employee’s character, ability to work with others, and ability to meet the employer’s present and future standards.” Unless bad faith is proven, an employer can terminate the employment of a recent hire without notice (or with limited notice) and without reason.
When all else fails…go to your back-up: Using “backstop” contractual language can help employers if an employee challenges the agreement. For example, using an “entire agreement” clause protects an employer from claims that there are external, unwritten promises made to the employee that form part of the agreement. Warranties from an employee that they have not been induced to resign from a position or that confirm that the employee signed the agreement willingly without any undue influence are important contractual terms. While it’s not clear from the decisions whether there was any “backstop” language in the Van Wyngaarden employment agreement, such language would have strengthened any defence to his challenge to the agreement.
[i] The Employee appealed a motion judge’s order dismissing his action for wrongful dismissal.
