Many employers in Ontario use a probationary period to assess
the suitability of a new hire. Contracts of employment will
often stipulate that employees may be dismissed with or without
notice, with or without cause during their probationary
periods. Since the Employment
Standards Act, 2000 (the “ESA”) states that
employees with less than three months of service are not entitled
to any notice of termination or pay in lieu of notice, employers
might be tempted to assume that any employee who is dismissed
during her contractual probationary period is not entitled to any
notice of termination. A recent decision of the Ontario Small
Claims Court calls this practice into doubt.
In Cao
v. SBLR LLP, the Court considered a claim for pay in
lieu of notice of termination by Suyi Cao, an accountant employed
by SBLR LLP for just over a month. At the time Ms. Cao was hired,
she signed an offer letter which provided for a 90 day probationary
period. She was also provided with a copy of the SBLR LLP
employee manual, which indicated that employees who were
experiencing performance issues would be asked to attend meetings
to discuss their performance and would be given suggestions for
improvement.
Approximately one month into her employment with SBLR LLP, Ms. Cao
was notified that her employment was being terminated. She was
advised in that meeting that she was not performing at the level
required by SBLR LLP and that the company needed her to obtain her
Certified General Accountant (“CGA”) designation by the
following summer, which she had advised was impossible due the
course schedule. It should be noted that Ms. Cao’s offer
of employment made no reference to the CGA designation.
At trial, SBLR LLP alleged that it had just cause to terminate Ms.
Cao because she had represented to the company that she would
complete her CGA courses by the summer of 2009 when, in fact, she
would not be in a position to do so and, further, because she had
misled SBLR LLP regarding her experience with preparing T2 tax
returns.
Ms. Cao testified that the termination meeting was the first time
she had been given any negative feedback about her work. The
termination letter did not allege just cause for her dismissal and
her Record of Employment indicated that she had been
“terminated involuntarily without cause”. Ms. Cao
was not provided with any pay in lieu of notice of
termination.
The deputy judge rejected the just cause allegations, finding that
the defendant had no evidence that Ms. Cao had misled the company
about any of her abilities or the anticipated completion of her CGA
designation. The deputy judge then turned to the question of
whether or not the plaintiff could be dismissed during the
probationary period without notice or pay in lieu of
notice. The deputy judge held that employers who dismiss any
employee during the probationary period are bound to act
“fairly and with reasonable diligence” in determining
whether or not the proposed employee is suitable to the
job. Further, the probationary employee must be given a
reasonable opportunity to demonstrate his or her ability to meet
the standards of the employer.
Since the defendant had led no evidence at trial supporting its
conclusion that Ms. Cao was unable to perform the requirements of
her job and could not demonstrate to the Court that Ms. Cao had
been given a fair opportunity to respond to the alleged concerns
regarding her performance. The deputy judge concluded that
SBLR LLP did not have just cause to terminate Ms. Cao’s
employment and, further, that it had terminated her during the
probationary period in bad faith. Accordingly, Ms. Cao was
entitled to common law notice of termination, which the deputy
judge fixed at four months.
Although this is a decision of the Small Claims Court and thus may
not be given a great deal of weight by Superior Court judges, there
are certain lessons that can be taken from the ruling. First,
although the contract between Ms. Cao and SBLR LLP had a
probationary period, the agreement did not state specifically that
Ms. Cao would not receive any notice of termination if she was let
go during the probationary period and it did not refer at all to
the minimum standards prescribed by the ESA. Including such
language in the contract would have given SBLR LLP a better defence
against Ms. Cao’s claim for common law notice of
termination.
Second, the deputy judge placed a great deal of emphasis on the
section of the employee manual that told employees they would be
given opportunities to improve poor performance. Employers
must always follow their own policies and procedures as the Courts
view these documents as promises you have made to your
employees. If you fail to honour your own policies when
dealing with employees you are at risk of being found to have acted
in bad faith.
Third, if there are particular qualifications, skills or
professional designations that you believe are essential to a job,
it is advisable to refer to them in both the job posting and the
offer letter. You may also wish to make the offer of
employment conditional upon the applicant confirming that they do,
in fact, possess the qualifications referred to in their
resume.
This decision illustrates the risk of failing to communicate with
your employees at all stages of the employment relationship, from
hiring to firing. If Ms. Cao’s employer had clearly
communicated its expectations regarding her CGA designation on
hiring, had met with her during the employment relationship to
communicate its concerns and then implemented the termination only
after she failed to address such concerns, it is unlikely that
there would have been a finding of bad faith and the company would
have been in a far better position to support its just cause
position. It’s also important to remember that just
inserting a reference to a probationary period may not be
sufficient to preclude a claim for common law notice of termination
during the first three months of employment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.