Many employers require employees to agree to a probationary period (usually 3 months, but sometimes longer) during which the employer can dismiss the employee for any lawful reason whatsoever without notice or pay in lieu. The purpose of the probationary period is to allow the employer an opportunity to assess the new employee and determine whether the employee is doing well in his/her job. Probationary periods are not automatic; rather they must be provided for in the employment contract. While the Employment Standards Act, 2000 does not require the payment of mandatory termination pay during the first 3 months of employment, it is not a “probation period” as such.
Trouble can sometimes arise when an employer is unsure about a particular employee. The employer may want to give the employee a further opportunity to prove him/herself without foregoing the right to dismiss him or her without notice or pay in lieu. In other cases, an employer may wish to dismiss the employee without notice or pay in lieu but needs the employee to work beyond the probation period set out in the contract for business reasons. In these situations, employers may consider extending the probationary period. However, employers must exercise caution. Much like the probationary period itself, the right to extend a probationary period is not automatic and must be set out in the original employment agreement. Failure to stipulate a right to extend the probation period can result in a constructive dismissal of the employee and give rise to an action in damages. Where a contract does contain such a provision, the provision must be exercised honestly and in good faith. If the probation is extended beyond 90 days, the Employer must still pay mandatory termination pay under the Employment Standards Act, 2000.
Probation periods are not as simple as the fabled “3-month rule.” A valid probationary clause (with or without an extension clause) is required. Employers who are unsure about their obligations to newer employees should seek out an employment lawyer before dismissing employees or extending their probation. Employees who have been dismissed without severance and told “but it’s within your probation period” may want to consider speaking to an employment lawyer to find out if they are entitled to damages.