Ontario Court of Appeal Weighs in on Payment in Lieu of Notice Requirements During Probationary Periods

Probationary periods, during which new hires are assessed on their ability to fulfill the functions of a job, are a common feature in many workplaces. There can, however, be confusion as to what type of notice of termination is required when an employer fires a probationary employee without cause – an issue the Ontario Court of Appeal recently explored in Nagribianko v. Select Wine Merchants Ltd.

Hired…and then fired

The Employee in question started working for the Employer in May 2013. His employment contract provided him with a salary, benefits, and expenses, but it also contained a six-month probationary period. The Employer fired the Employee within that six-month window because they considered him “unsuitable for regular employment.”

The dispute began in Small Claims Court where the Trial Judge found the termination had been wrongful because the Employer had failed to deliver a copy of the Employee Handbook to the employee, which outlined the rules of the probationary period, including its length of six months. As a result, the Trial Judge ruled the Employee understood the term “probation” to mean that he would be kept on if he performed well, and he would not have taken the job knowing he could be terminated without just cause and with only one week’s pay in lieu of notice. The Trial Judge awarded the Employee four month’s pay in lieu of notice.

Divisional Court Overturns Trial Ruling

The Employer appealed to Divisional Court where the original decision was overturned. The Divisional Court found the Trial Judge had erred by applying the term “probationary period” as the Employee understood it, rather than using an objective understanding of the term.

The Divisional Court’s decision stated “When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said,” adding “A reasonable person in the same circumstances as the Respondent/Plaintiff would have understood the term “probation” to mean a period of tentative employment during which Select would determine whether the Respondent/Plaintiff would be a suitable employee and would decide whether or not to make him a regular/non probationary employee.”

Court of Appeal Weighs In

The Employee appealed the Divisional Court’s decision to the Ontario Court of Appeal. In ruling in favour of the Employer, the Court of Appeal stated “The status of a probationary employee has acquired a clear meaning at common law. Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their suitability.”

As a result, the only pay due to an employee terminated during probation is that which is set out in the Employment Standards Act, which states that no payment in lieu of notice is required for employees with less than three months on the job, with only one week’s pay being required for three months to one year.

This decision means that employees working through a probationary period can be fired for reasons of suitability, though their legal obligations for payment in lieu don’t change during this time, and still fall within the minimum requirements set out in the Employment Standards Act.

Contact the offices of Peter McSherry if you have been terminated without cause and without appropriate pay in lieu of notice. We can help you understand your rights under your contract and employment law. We can be reached online or by phone at 519-8