July 18, 2017

By Brad Smith

There is a presumption that an indefinite employment contract can be terminated by providing the employee with reasonable notice. This includes short-term employees. This presumption is overcome if the parties agree to a period of probation. The Ontario Court of Appeal has clarified the meaning of a probationary employee and the effect of probation.

In Nagribianko v. Select Wine Merchants Ltd., the employee was hired with a probation period of six months. The employer terminated the employee 3 days short of six months.

The employee sued for pay in lieu of reasonable notice. The Court of Appeal concluded the employee was not entitled to reasonable notice because the employer terminated him during the probation period. The Court stated:

“Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their suitability”.

Further, the Court of Appeal confirmed the parties cannot contract out of the minimum notice standards in the Employment Standards Act. Thus, if the probationary employee works more than 3 months, the employee should receive statutory notice or pay in lieu of notice of one week.

The probation period saved Select Wine Merchants Ltd. a lot of money. Rather, than paying the employee 4 months’ salary and benefits, the employer only had to pay 1 week!

The takeaway from this decision:

For an employer:

• The employer and employee should expressly agree the employee is hired on probation.
• Give the employee a fair and reasonable opportunity to demonstrate her or his suitability.
• Make a good faith determination that the employee is unsuitable for permanent employment.
• Ensure the minimum standards in the Employment Standards Act are honoured.
• Terminate prior to the expiry of the probation period.
• The terminated probationary employee is not entitled to common law notice or pay in lieu.

For an employee:

• Ensure you understand whether a probation applies.
• Consider the risk of termination prior to the end of the probation period.