Canada: Divisional Court Comments On Termination Rights Of Employer During Probation Period

Are there ANY limits on an employer firing an employee during the initial probation period?

The Divisional Court recently weighed in on this evolving issue in Nagribianko v Select Wine Merchants Ltd., 2016 ONSC 490 (Div. Ct.).

Nagribianko is a significant decision addressing the conflicting rights of employers and employees during probation periods.

The Facts

In Nagribianko, the appellant employer — a wine and spirit import agency — entered into a written employment contract with the plaintiff employee. The employment contract was fairly detailed. It provided for an annual salary of $65,000; the right to participate in certain benefit plans and programs; a monthly car allowance of $750; paid vacation days, accrued at a rate of 6% of total earnings; use of a company laptop; and reimbursement of up to $150 per month for the business use of the employee's  personal mobile communication device. It also provided for a probationary period of 6 months.

The employer terminated the plaintiff after 4 months (still during the probation period) because "after careful consideration", the employer concluded that the plaintiff was "unsuitable for regular employment." The plaintiff subsequently sued for wrongful dismissal.

The Trial

At trial, the employee sought remedies for wrongful dismissal, including damages for reasonable pay in lieu of notice.

The trial judge found that the meaning of "probation" was not clear on the face of the contract, and therefore considered the parties' subjective understanding of probation. The trial judge accepted the evidence of the employee that he was "induced" to work for the employer on the understanding that acceptance of the job would ultimately lead to permanent employment. The trial judge awarded the plaintiff damages in lieu of notice equivalent to four months' salary and benefits.

The Appeal

On appeal, Justice Sanderson of the Divisional Court reviewed in detail the nature of the employment relationship during probation, finding that it was "tentative" at best. Her Honour went on to find that "a probationary employer must extend to the probationary employee a fair opportunity to demonstrate suitability for permanent employment. However, in the absence of bad faith, an employer is entitled to dismiss a probationary employee without notice and without giving reasons."

Where the employment of a probationary employee has been terminated for unsuitability, "the employer's judgment and discretion in the matter cannot be questioned. All that is required is that the employer show that it acted fairly in determining whether the probationary employee was suitable and that he/she was given a fair opportunity to demonstrate his/her ability."

The Divisional Court therefore overturned the trial judge, finding that there was an error in failing to enforce the clear terms of the employment contract that the plaintiff had signed that made reference to a probationary period of 6 months. While the plaintiff, subjectively, may have believed that the employer would find him to be a suitable employee, a reasonable person in those circumstances would also have understood that that might not happen.

Justice Sanderson summed up the nature of probationary employment as follows: "probationary employment, on its face and by its nature, is inconsistent with any inducement or promise of long-term employment."

On the facts of the case, the employer properly and in good faith applied the suitability test. The appeal was allowed, and the plaintiff's lawsuit against the employer was dismissed.

The Lesson

All members of the workforce — both employers and employees alike — ought to be made aware of this case, as it is the latest pronouncement on employment rights in the context of a probation period.

Often employers mistakenly believe that they can terminate at-will during the probation period. While they certainly have more freedom to do so without risk of financial consequence, they still must appropriately consider the suitability of the employee, in good faith, and give a fair opportunity to the employee to demonstrate his or her ability.

Written employment contracts should clearly set out a period of probation, if applicable. Employees should be made aware at the outset what the probation term refers to in order to avoid any subjective assumptions by prospective employees that the probation period is merely a formality, without any real significance. Had that been done in the case at bar, arguably, expensive and time-consuming litigation could have been avoided.

To review the full decision, visit the Canlii website.

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.

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