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Limits of the probation clause

Employees owed a good faith assessment of their job suitability
By Monty Verlint
March 03 2017 issue

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Employers often believe that employees who are considered “probationary” can be terminated at any time and without notice. However, a recent decision of the Supreme Court of British Columbia in Ly v. British Columbia (Interior Health Authority) 2017 BCSC 42 offers a useful lesson to suggest otherwise. Even though the court found the employee to be subject to a valid probationary term, it also found that the employer did not conduct a good faith assessment of the employee’s suitability for continued employment. Therefore, the employee was entitled to “reasonable notice of termination” at common law.

In this case, the plaintiff, Phuc Ly (the employee) sued for wrongful dismissal. He commenced his employment with the defendant, Interior Health Authority (the employer) on Nov. 4, 2014, and was terminated on Jan. 8, 2015, without notice. The probationary clause in his offer letter simply stated that “Employees are required to serve an initial probationary period of six (6) months for new positions.” The employee argued that the “bare reference” to probation in his offer letter was not sufficient to create a valid contractual probationary period. The court disagreed, holding that the term “probation” is well understood in business and industry as one where an employee is being assessed by the employer to ascertain their suitability as a permanent employee.

The court reviewed additional agreements titled “2008” and “2014 Terms and Conditions of Employment” that included similar probationary terms. Among other things, the agreements stated that an “employee terminated within the probationary period is not entitled to notice or payment in lieu of notice.” The employee argued that this particular term of probation was invalid because it offended s. 63(1) of the B.C. Employment Standards Act (ESA), which required payment of one week’s wages after three months of consecutive employment. However, the court held that neither document was actually “incorporated” into the plaintiff’s employment agreement; therefore, the court did not need to decide the question of invalidity of the clause because of the ESA.

However, the court analyzed whether the ESA applied at all to the employment agreement. It stated that even if an employee did not expressly agree to specific terms and conditions that negated reasonable notice under common law, there was nonetheless an “implied contractual right” to dismiss without notice during an employee’s probationary period. This sufficiently rebutted the presumption of reasonable notice at common law. At the same time, the common law would not imply a term into the employment contract that is inconsistent with the legislative requirements of the ESA. Therefore, even a probationary employee will be entitled to the benefits described in the ESA.

Having decided that the probationary clause was valid, the court went on to hold that an employer must still carry out a “good faith assessment” of the employee’s suitability for continued employment and relied on the B.C. Court of Appeal decision of Jadot v. Concert Industries Ltd. [1997] B.C.J. No. 2403 (Jadot) for this proposition. It stated that while an employer is not required to give reasons for the dismissal of a probationary employee, the employer’s conduct will still be reviewed by the court in light of various factors such as: 1) whether the probationary employee was made aware of the basis for the employer’s assessment of suitability before, or at the commencement of, employment; 2) whether the employer acted fairly and with reasonable diligence in assessing suitability; 3) whether the employee was given a reasonable opportunity to demonstrate his suitability for the position; and 4) whether the employer’s decision was based on an honest, fair and reasonable assessment of the suitability of the employee, including not only job skills and performance but also character, judgment, compatibility and reliability.

In the Ly case, the court concluded that the employer did not meet the requisite standard of good faith in assessing the employee’s suitability for the position. He was not given a reasonable opportunity to demonstrate his suitability for his job as manager. As a result, the court awarded three months’ pay in lieu of reasonable notice plus unpaid expenses.

This case suggests that a brief reference to a probationary period, however long it is, will be sufficient to rebut the presumption of reasonable notice at common law. However, the employer will still need to satisfy the minimum requirements of employment standards legislation and should not include any terms that violate the applicable statutory notice periods (for example, by stating that an employee can be terminated without notice where the probationary period is more than three months).

In addition, it is likely not sufficient for the employer to decide on a whim whether the employee’s performance is suitable. Instead, the case advises that employers should review whether the employee was aware of the requirements; the employer provided a reasonable opportunity for the employee to demonstrate suitability; and the employer made a fair assessment. Therefore, documenting communications to the employee about employment requirements, arranging performance reviews and meetings and providing a reasonable time frame for performance will go a long way in demonstrating good faith.

Monty Verlint is a partner in the Toronto office of Littler LLP. He is in the hiring, performance management and termination practice.

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