The "Suitability" Test: Wrongful Dismissal from Probationary Employment

Many employers insist on a period of 'probation' in their employment contracts.

Sometimes it's clear on the face of the contract what that means - usually, that the employee can be dismissed without notice and without cause during the probation period.  Sometimes, it's less clear, with a verbal or written reference to a 'probation' period of a particular length of time.

The case law, in the non-union context, has tended toward a fact-based interpretation of the word 'probation'.  In a 2001 case, Easton, Justice Lederman concluded that the 'probationary' language in the contract suggested only that a raise at the end of the probationary period was contingent on satisfactory performance - and did not manifest in a right to terminate summarily without cause.  Thus, employment lawyers such as myself have encouraged employers to include very clear contractual language about what probation means.

Even probationary language, however, doesn't give the employer to dismiss, carte blanche, without any reason.  The courts have also consistently held that probationary employees are entitled to good faith evaluation of their work - that the employer cannot use a probationary clause to terminate for reasons unrelated to performance or fit in the workplace.  In practice, it turns into something of a "just cause lite" analysis.

Yesterday, the Divisional Court released its decision in Nagribianko v. Select Wine Merchants Ltd., a case where an employee was dismissed without notice toward the end of a six month probation period.

The Trial Decision

Nagribianko sued in Small Claims Court.  The Deputy Judge accepted that the meaning of the word 'probation' was not defined within the employment contract.  (It was defined in the employee handbook, but the evidence was that the handbook was not provided at the time the contract was signed, and thus not effectively incorporated into the contract.)

Accordingly, the Deputy Judge awarded four months' pay in lieu of notice.

The Appeal

The employer argued, and the Divisional Court accepted, that the word 'probation' has an established meaning in law, and that probationary employment can be terminated in accordance with the "suitability test" - a good faith analysis of whether or not the employee is suitable to the workplace.  This meaning existed without requiring a reference to the employee handbook.

As the employer had engaged in such a good faith analysis, the Divisional Court allowed the appeal and dismissed the action.

Commentary

The "suitability test", per se, arises from the unionized labour law context:  In cases of discharged probationary employees in union contexts, that is a very frequently applied test.

And there's no question that, where an employment contract purports to give the employer a right to dismiss probationary employees without notice, the courts will apply a similar test.

But there's a danger in directly importing labour (unionized) principles into employment (non-unionized) contexts:  In the union context, these matters are governed by collective agreements, with specific and detailed language, often derived from certain boilerplates.  And collective agreements will include language, even on a near-universal basis, which are not always present (or sometimes very seldom present) in a non-union employment contract.

So caution must be exercised when importing such labour principles, deriving from a collective agreement, into employment contexts, where the contract may well set out markedly different terms.  Thus, a term may have been consistently defined in a way in the labour law regime, but that does not result in a conclusion that the term has a settled definition at law in a broader way.

In particular, the question here is one that basically never arises in the labour context:  Does the contract effectively give the employer a right to terminate summarily without just cause?  If it does, then something akin to the suitability test would certainly be applicable.  But the Deputy Judge concluded that the language - which is different from that found in collective agreements - did not create such a right.

And there's a more fundamental problem with the Divisional Court's analysis, in the context of the facts described in the case:  A six-month probationary period, allowing termination without notice on the basis of the "suitability test", cannot withstand scrutiny under the Employment Standards Act.

ESA Entitlements

Under the ESA, most employees are entitled to at least one week notice of termination or termination pay, if they've worked for the employer for a period from 3 months to 12 months.  There are a number of exemptions, including for an employee who "has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer."

It's a high test - generally even harder to satisfy than the common law test for 'just cause'.

Thus, dismissing an employee with nearly six months of service, on the basis of the suitability test could absolutely not disentitle an employee to statutory notice or termination pay, and any probationary language that purports to do so, expressly or impliedly, would be void.

It would be impracticable, and inconsistent with well-established legal principles, to interpret vague probationary language as automatically excluding common law 'reasonable notice' but not statutory notice or termination pay.  Thus, a good employment contract with a longer-than-3-month probation period will typically have ESA saving language, specifying that the meaning of the probation language is to allow termination on provision of ESA minimums only.  (In fact, the employee handbook in this case had such language, but the Divisional Court did not disturb the finding that this was not integrated into the contract.)  Whereas a non-extendable probation period of less than 3 months might not have the same issue, defining itself as permitting termination without any notice whatsoever.

Impact

The clear articulation of the suitability test is useful, in general terms.  This is consistent with the long history of judicial findings that a probationary termination isn't completely beyond judicial scrutiny.

But the ESA issue does not appear to have been considered by the Divisional Court.  In order for this result to be consistent with the ESA, one would have to read the mere word 'probation' as integrating a right to terminate, subject to the suitability test, upon the minimum notice set forth in the Employment Standards Act.  I do not take the Divisional Court as actually proposing this, nor would it be likely to stand as a proposition of law if it did.

One Last Headscratcher

This is something that's slightly perplexed me about the 'probation' doctrine for a long time:  Since probation can't reduce an employee's entitlements to less than the minimum entitlement under the ESA, and a probation clause can't be triggered for straight economic reasons or otherwise arbitrarily...what's the point of probationary language?

An employer who dismisses a 'probationary' employee is going to be called upon to prove that it gave the employee a meaningful opportunity to establish suitability, and considered the employee's suitability in good faith.

By contrast, an employer who relies on an ESA-minimum termination clause (when enforceable) is not called upon to justify the termination in any manner whatsoever (except to the extent, perhaps, of excluding illegal reasons for termination).  If that's within the first three months, the employee is entitled to nothing.  If it's after the first three months, entitlements remain quite nominal.

The only advantage I can see to the probation language is that it's less likely to be disregarded by the courts.  But, even then, many of the problems that exist with termination clauses also arise for probationary language.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.