Employment Law Essentials: When is a probationary employee not a probationary employee?

When the Employment Standards Act says so or when your employment contract doesn’t apply

The issue of probationary employees has arisen several times in recent case law. This jurisprudence sheds some light on an area of the Employment Standards Act (the “Act”) which is often taken for granted for its simplicity. The two cases below illustrate that the concept of an employee “on probation” may be more complicated than expected and that it is critical that employers understand the subtleties of the concepts.

Probationary Employees Key Points

  • Although the concept set out in Section 63 of the first three months of employment and the common law concept of a probationary employees are similar in that during this period an employer may dismiss an employee without notice without just cause, the similarity ends there;
  • Employers may not circumvent the notice provisions in Section 63 by putting the employee on probation after their first three months of employment;
  • A termination before employment may not attract the contractual notice provision for probationary employees. Because probation does not start until the employment starts, termination before employment may attract either the notice period for work probation or common law notice.
  • A court has yet to examine whether a carefully worded contract, making provision for the possible termination before employment begins, would defeat the Plaintiff’s arguments in the Degagne case as set out below.

The Statutory Framework and Common Law Principle

The Act does not define probationary employees. The only liability provision pertaining to employees during the first three months of their employment is section 63. Section 63 provides:

63 (1) After 3 consecutive months of employment, the employer becomes liable to pay an employee an amount equal to one week’s wages as compensation for length of service.

The flip side of this provision is that there is no liability under the Act arising from length of service for an employee who has been employed for less than three months. This has become synonymous with the term “probationary period”, perhaps erroneously. Probation is a common law principle, during which an employer can terminate the employment after a good faith review of suitability, without notice obligations except for the minimums under the Act after three months. Employees are on probation because their employment contract has specified a certain amount of time as a probationary period. The case law below shows employers who confuse the Act’s provisions with the common law/contractual definition of probation do so at their peril.

Re: K&R Poultry Ltd.

This decision of Member Thornicroft for the Employment Standards Tribunal addresses a common misconception of an employee “on probation”. The relevant facts are that after years of employment, the employee was demoted, accepted that demotion, and the demotion document contained a term providing for a new probation period of three months. The employer then terminated the employment within those three months. The employer argued that because the termination occurred during the probationary period, the employee could be terminated without notice.

Member Thornicroft quickly rejected that argument. He found:

  1. there is “no concept of a probationary employee” in the Act;
  2. section 63 provides that no compensation is payable until the employee has completed 3 consecutive months of employment, but this does not equate to the employee being “on probation” for the first three months; they are different concepts;
  3. even if could be said that an employee is “on probation” for the first three months of his or her employment, this period cannot be restarted because the employee agreed to be on probation. This period pertains only to the first three months of employment. In Re: K&R Poultry, that period ended years earlier.

Clearly, the employer in Re: K&R Poultry attempted to get creative with the definition of the probationary employee, and was lucky to have won the appeal on other grounds. The simple fact is that after the first three months of employment, absent just cause, liability arises under the Act from a termination. An employer cannot return to the state of affairs where it was possible to terminate the employee without notice simply by putting the employee on probation again.

Degagne v. Williams Lake (City), 2015 BCSC 816

In Degagne v. Williams Lake (City), 2015 BCSC 816, the employer, the City of Williams Lake, terminated the employee, Mr. Degagne, before he started employment. Before his first day of work, Mr. Degagne sent his employer an email setting out his proposed approach to an ongoing labour dispute. In reaction, the City decided to terminate him before he started.

His employment contract provided for a six month probationary period. If he were terminated during that period, he would be entitled to one month’s written notice of termination. If he were terminated after that period, he would be entitled to six months’ written notice of termination.

The issue was which notice period, if any, applied to Mr. Degagne’s termination, since he was terminated before he started his first day of work. The City argued the one month “probationary” period applied. Mr. Degagne argued that his probation could not start until he started work. Since he had not started work, he could not have started his probationary period. He was therefore entitled to six months.

Dardi J. sided with Mr. Degagne. She interpreted the contract to mean that the one month clause only applied “during” the probationary period. Not having commenced work, Mr. Degagne was not in the probationary period. He was therefore entitled to the six months of notice for termination outside the probationary period.

Employers should take note because of the fact that even the most seemingly straightforward decision may have unforeseen legal consequences. There is no doubt the City was surprised that their liability for notice did not escalate over time, as contemplated by the contract, but rather began at six months, then dropped to one month, then returned to six months.

The decision is noteworthy because it may seem counterintuitive that an employee could be entitled to more notice before his employment began than he would be during the probationary period. The case emphasizes the importance of retaining legal counsel to consult before the termination of any senior employee.

The Employment Law Team at EKB has experience in all matters pertaining to the Employment Standards Act and, in particular, probationary employees. David E. Turner conducts seminars twice per year on the Employment Standards Act at the People’s Law School.