There is often a lack of clarity about how employers can implement and use ‘probationary’ periods, and whether having a probationary clause is even the best way to accomplish desired employer outcomes.
Much guidance is available in Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42 (“Ly”), the leading British Columbia decision on the topic.
What is a Probationary Period?
Probation is a defined period at the beginning of employment when an employee may prove suitability for permanent employment and the ability to meet the standards set by the employer.
How Must an Employer Assess ‘Suitability’ for Permanent Employment?
Employers do not have to show ‘just cause’ to dismiss a probationary employee. Neither are they required to give reasons for the dismissal of a probationary employee.
The decision in Ly, however, makes it clear that employers are required to show the dismissal arose out of a good faith assessment of the employee’s lack of suitability for permanent employment. The Court stated the assessment of good faith considers several factors, including:
Whether the probationary employee was made aware of the basis for the employer’s assessment of suitability before, or at the commencement of, employment;
Whether the employer acted fairly and with reasonable diligence in assessing suitability;
Whether the employee was given a reasonable opportunity to demonstrate their suitability for the position; and
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 Ly, it was held that Mr. Ly, the employee, had made “genuine and concerted attempts to better understand the basis for his employer’s assessment of his suitability but his efforts to do so were not responded to with clarity by his employer”. Mr. Ly testified that he was “not given a chance” and that the employer had not adequately answered his questions about expectations.
On this basis, the Court ruled the employer had failed to make a good faith assessment of Mr. Ly’s suitability. Consequently, Mr. Ly was entitled to damages based on a reasonable notice period of three months, in addition to amounts he was owed for relocation and travel expenses. Mr. Ly had only been employed with the e
mployer for 2.5 months.
What is the Maximum Permitted Length of a Probationary Period?
The British Columbia Employment Standards Act (the “ESA”) sets out minimum employment standards that cannot be lowered, even by agreement between an employee and employer. Accordingly, any part of an employment contract that does not comply with the ESA is void and cannot be relied upon by the employer.
Section 63 of the ESA requires employers to provide notice, or pay in lieu of notice, of one (1) week following three (3) months of continued employment.
Therefore, if a probationary clause in an employment contract is longer than three months, and states that an employee is not entitled to any notice or pay in lieu of notice, the clause will be invalid. This will result in the employee being entitled to common law reasonable notice, which is considerably higher than the ESA minimum requirements.
Tips for Employers
In practice, the good faith suitability assessment is fairly onerous, and employers are often left wondering if there are even any benefits to having a probationary period. The good news is there are ways for employers to accomplish at least some of their objectives.
Probationary clauses can be effective provided that:
the clause is clear and express, including a clear indication of what will happen if the employment relationship ends before the probationary period terminates;
the clause meets ESA section 63 minimums (including providing the required notice or pay in lieu for anyone with over three months’ service); and
the employer is prepared to apply the ‘suitability’ standard from Ly properly and in good faith.
If applying the suitability standard from Ly appears to be too onerous, employers can, alternatively, include a clause in the contract that an employee will begin at a lower salary and receive a raise in pay at 6 months (or 8 months, or 12, etc.). Likewise, extended health and dental benefits need not be provided right away, and can be added after a period of time that effectively allows the employer to decide whether to continue or end the employment.
Whether or not an employer chooses to have a separate probationary clause, it is highly advisable for the contract to include a properly drafted termination provision that avoids liability for common law notice. For our blog on the difference between ESA notice requirements and common law severance, please click here.