The Ontario Court of Appeal recently confirmed that employers can terminate employees during the contractually prescribed probationary period without the provision of common law notice.
Mr. Nagribianko, the Plaintiff, commenced an action in Small Claims Court after he was terminated during the six month probationary period as set out in his employment contract. The employment contract itself had a six month probationary period but did not speak to how much notice would be provided if terminated during the probationary period, although the Employee Handbook set out that notice would be limited to the Employment Standards Act, 2000 (the “ESA”) if terminated during the probationary period. The Trial Judge concluded that the Plaintiff had been wrongfully dismissed and awarded him four (4) months’ notice. In making this determination, the Trial Judge relied on the fact that the Plaintiff had not been provided with an Employee Handbook when he signed the contract back. The Trial Judge further found that the Plaintiff did not understand the term “probation”. In awarding four (4) months’ notice to the Plaintiff, the Trial Judge found that the employer had ‘induced’ him to leave secure employment in order to commence employment with the company.
The employer appealed the Small Claims Court decision to the Superior Court of Justice (see: Nagribianko v. Select Wine Merchants Ltd., 2016 ONSC 490). In that decision, the Superior Court of Justice allowed the employer’s appeal and dismissed the Plaintiff’s action, finding that: a reasonable person would have understood that probationary periods are inherently unstable and tentative. Further, probationary employment on its face and by its nature is inconsistent with any inducement or promise of long-term employment. The Superior Court of Justice found that the employer had properly and in good faith applied the suitability test for the employee. On this basis, the employer successfully appealed and the action was dismissed. This meant the employee was not entitled to reasonable notice as he was terminated during the probationary period solely with the provision of notice under the ESA.
The employee appealed the decision of the Superior Court of Justice to the Ontario Court of Appeal (see: Nagribianko v. Select Wine Merchants Ltd, 2017 ONCA 540). In that decision, the Ontario Court of Appeal dismissed the employee’s appeal, upholding the decision of the Superior Court of Justice and finding that the employer was entitled to terminate the employee during the probationary employee by solely providing him with the minimum statutory notice as prescribed by the ESA (which was one week). In making this decision, the Ontario Court of Appeal held that: “The Divisional Court was therefore correct in holding that the trial judge erred in failing to give effect to the probationary term of the contract, and in treating the appellant, for dismissal purposes, as though he was a permanent employee” (at para 10).
In its decision, the Court of Appeal noted that the Divisional Court was also correct in finding that the trial judge erred by interpreting the term “probation…six months” according to the subjective understanding of the employee, when contractual terms are to be interpreted based on an objective assessment of the intention of the parties. In light of this, and given that there were no specific terms in the employee’s contract to the contrary, the Ontario Court of Appeal held that the contractual term “probation…six months” carries the common law meaning that enables an employer to terminate without notice if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided that the probationary employee was given a fair and reasonable opportunity to demonstrate suitability. As such, the employee’s appeal was dismissed.
Employer Takeaways
This decision is good news for employers as it confirms that employers can rely on a probationary clause to limit an employee’s notice if terminated during the probationary period and if the employee is given a fair opportunity to try the role. A well drafted contract always serves as the best protection for an employer to help limit liabilities, the prenuptial of employment law. In the case described above, the contract indicated the probationary period was six months but it did not specifically indicate how much notice the employee would get if terminated during the probationary period. Although that employer was successful in that case, ideally, the probationary clause should include language that states how much notice will be provided in the event of termination during the probationary period, and this should never be less than the statutory minimums as that could render the provision unenforceable. Under Ontario’s ESA, an employee is not entitled to notice in the first three months of employment, but between three months and one year of employment, an employee is entitled to one week of notice. Employers should diarize the date the probationary period expires to ensure the employee’s performance is reviewed and considered before the end of the period. Beyond this, a well drafted termination provision that applies post-probationary period will also serve to significantly protect employers.
Employee Takeaways
When employees are considering joining a new employer they should always carefully review all contractual provisions including probationary and termination clauses. In the event an employee is leaving secure employment for a new role, he or she might consider requesting a waiver of the probationary period or some guaranteed notice payment in the event of termination during the probationary period. This may be even more important if the employee has been recruited from secure employment to join the new employer.
In the event the employee is not given a ‘good faith’ opportunity to try the role or the employee is terminate due to grounds protected by the Human Rights Code, he or she may be able to argue a longer notice period in such circumstances.