Putting Probationary Periods on Probation

In Malcom Gladwell’s “Outliers,” he proposes that an individual’s success is as much based on their context as their personal attributes. Most of us concede that “nurture” is still almost always necessary, even when any “nature” in talent is latently found. Gladwell takes this one step further though, and proposes that true success or mastery of a skill requires 10,000 hours of dedication.

Of course Gladwell focuses extensively on lawyers in this premise, dedicating at least Chapter 5 to the elusive Wall Street lawyers,

No one rises to the top of the New York legal profession unless he or she is smart and ambitious and hardworking… But we know far more than
that, don’t we? Success is not a random act. It arises out of a predictable and powerful set of circumstances and opportunities…

I’ve referred to the perceived need in the legal profession to invest time as a plague of “chronocracy.” Think face-time in the firm, years from call date, and of course, the billable hour. Gladwell’s premise would appear to fit nicely into this model.

The need to invest a certain amount of time in a profession or job is obviously not limited to lawyers. Employers typically employ “probationary periods” of new hires to assess their suitability for the job. Unfortunately, the concept of a probationary period is not found in the Employment Standards Act itself, so employers have to explicitly contain this in a contract to hold employees to this standard, and even then, the concept is frequently confused with reasonable notice.

The Ontario Court of Appeal recently released a decision in Nagribianko v. Select Wine Merchants Ltd., where the court upheld the Divisional Court’s decision last year against an employee who claimed wrongful dismissal while on his probationary period.

The parties signed an employment contract in May 2013, providing him an annual salary, certain benefits and expenses, and included a probationary period of 6 months. He started his employment before the end of May 2013, but was terminated within this 6 month period on Nov. 21, 2013 because he was considered “unsuitable for regular employment.”

The employee commenced an action in Small Claims Court for wrongful dismissal, and was successful in receiving common law damages of 4 months salary and benefits in lieu of reasonable notice. The basis for the decision was that the Deputy Judge was unable to determine what the probationary period entailed, and accepted the evidence of the employee that he did not receive a copy of the employee handbook, referenced in the employment contract, at the time of signing.

Justice Sanderson of the Divisional Court reversed this decision on appeal, finding an error in law in enforcing the clear terms of the contract. The employee handbook was not necessary to understanding the concept of a probationary period,

[39] The Deputy Judge erred in law in failing to recognize that contractual interpretation is an objective exercise.

[40] 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.

[41] On his own evidence, the Plaintiff /Respondent understood that during the 6 month probationary period he would be at risk. He may have believed that the employer would find him to be a suitable employee, but a reasonable person in those circumstances would also have understood that that might not happen.

Justice Sanderson cited the Court of Appeal in Salah v. Timothy’s Coffees of the World Incto support her position,

[16] The basic principles of commercial contractual interpretation may be summarized as follows. 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.  The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties.  The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity. Where a transaction involves the execution of several documents that form parts of a larger composite whole—like a complex commercial transaction—and each agreement is entered into on the faith of the others being executed, then assistance in the interpretation of one agreement may be drawn from the related agreements. See 3869130 Canada Inc. v. I.C.B. Distributing Inc. (2008), 2008 ONCA 396 (CanLII)66 C.C.E.L. (3d) 89 (Ont. C.A.), at paras. 30-34Drumbrell v. The Regional Group of Companies Inc. (2007), 2007 ONCA 59 (CanLII)85 O.R. (3d) 616 (C.A.), at paras. 47-56SimEx Inc. v. IMAX Corp. (2005), 2005 CanLII 46629 (ON CA)11 B.L.R. (4th) 214 (Ont. C.A.)at paras. 19-23Kentucky Fried Chicken Canada v. Scott’s Food Service Inc. (1998), 1998 CanLII 4427 (ON CA)41 B.L.R. (2d) 42 (Ont. C.A.), at paras. 24-27; and Professor John D. McCamus, The Law of Contracts (Toronto: Irwin Law Inc., 2005), at pp. 705-722.
[emphasis added]

Justice Sanderson distinguished the standards of dismissal for a probationary employee and a non-probationary employee. For the former, it is suitability. It is only for the latter that the appropriate standard is just cause,

[36] 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 Court of Appeal upheld this assessment, stating,

[6] The trial judge’s decision to treat the term “Probation…… Six months” as having no meaning was wrong. The parties agreed to a probationary contract of employment, and the term “probation” was not ambiguous. 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: Mison v. Bank of Nova Scotia (1994), 1994 CanLII 7383 (ON SC)6 C.C.E.L. (2d) 146(Ont. Ct. (Gen. Div.)), at para. 43.

This decision provides further assurances that the Court of Appeal will provide some meaning to contractual terms in an employment contract, even where there may be some ambiguity. Following the court’s decision in Howard v. Benson Group Inc. last year that any contractual ambiguity would be construed against the employer. However, the court’s more recent decision this year in Wood v. Fred Deeley Imports Ltd. illustrated that the court would also look at the circumstances around the signing of the contract if there is contractual ambiguity in order to give effect to contractual terms.

In Wood, the court upheld a contract that was provided soon after the employee started working, despite the lack of fresh consideration, because there was no material change in the relationship. However, they did not give effect to an ambiguous term around the exclusion of benefits, and rejected the employer’s argument that they did not violate statutory requirements at the time of termination, irrespective of the contractual terms,

[47] …allowing employers to rely on their conduct at the time of termination of employment would also be inconsistent with one of the important considerations governing the interpretation of termination clauses: these clauses should be interpreted in a way that encourages employers to draft agreements to comply with the ESA. If employers can always remedy illegal termination clauses by making payments to employees on termination of employment, then employers will have little incentive to draft legal and enforceable termination clauses at the beginning of the employment relationship: see Machtinger, p. 1004.

What assisted the employer in Nagribianko was the employee’s testimony that he fully understood and new the risks of a probationary period at the time he signed the contract. A probationary period does not invalidate the employer’s responsibility to provide statutory notice, where applicable,

[7] It is true that there is a presumption that an indefinite employment contract is terminable only on reasonable notice, however that presumption is overcome if the parties agree to a probationary period of employment: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC)[1992] 1 S.C.R. 986, at p. 999Jadot v. Concert Industries Ltd. (1997), 1997 CanLII 4137 (BC CA)44 B.C.L.R. (3d) 327 (C.A.), at para. 29Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42 (CanLII)[2017] B.C.J. No. 43, at para. 42.

[8] Since it is not possible to contract out of the minimum notice standards provided for in the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”), probationary employees are entitled to receive statutory notice, or pay in lieu of that notice. In this case, the required period of notice is one week, which the appellant received: ESA, ss. 54, 61.

The key lesson from this case is that employers are still obligated to provide statutory notice of termination, or payment in lieu, even for probationary employees. Where that probationary period is up to 3 months, there will not be any notice required under the Act. For longer probationary periods, as in Nagribianko, that obligation remains despite the greater ability to dismiss a probationary employee based on suitability alone. The distinctions largely stem from a time when probationary employees could be dismissed without any notice or cause at all, whereas they must now be treated fairly and cannot contract out of the ESA.

The bigger question is the utility of probationary periods regardless. Whether the termination is for just cause (non-probationary) or for unsuitability (probationary), the ESA minimums remain the same. Although the Divisional Court cited Markey v. Port Weller Dry Docks Ltd. for characteristics of suitability, including an employee’s character, their ability to work with others, and the ability to meet the employer’s present and future standards, no actual reason need be provided to this employee on termination beyond suitability, as long as the notice is sufficient.

A recent trial level decision in B.C., Ly v. British Columbia (Interior Health Authority), cited the Divisional Court decision in Nagribianko, and further illustrates the limited utility of probationary periods,

[43] While the reasoning in Jadot provides that the contractual right of no reasonable notice during the probationary term is implied by operation of our common law, the analysis does not necessarily end at this juncture. That is because the common law relating to probationary periods is subject to legislative modification. More specifically, the common law will not impute or imply a term into an employment contract that is inconsistent with legislative requirements or entitlements such as those found in the ESA: see Chrysler Canada Ltd. v. Canada (Competition Tribunal)1992 CanLII 68 (SCC)[1992] 2 S.C.R. 394 at 404.

[48] Counsel for [the Employer] also argues that a probationary term can be considered as a form of fixed-term contract, at least for the purposes of ss. 65(1)(b) of the ESA. That subsection exempts employers from the statutory minimums found in ss. 63(1) in cases of contracts of a “definite” or fixed term. Counsel submits that viewing a probationary period in this manner allows employers to assess and dismiss employees for unsuitability during probationary periods longer than three months without offending the ESA.

[49] I do not find this argument persuasive. Agreeing upon a period of probation does not establish a fixed term contract: see Survival Systems v. Johnston(1997), 1997 CanLII 1991 (NS SC)164 N.S.R. (2d) 127 at para. 7 (S.C.). For a fixed-term contract to be established, the contract must contain “unequivocal and explicit language”, and “any ambiguities” will be interpreted “against the employer’s interests”: see Ceccol v. Ontario Gymnastic Federation (2001), 2001 CanLII 8589 (ON CA)55 O.R. (3d) 614 at para. 27 (Ont. C.A.). Further, the facts in this case do not support the conclusion that Mr. Ly’s six-month probationary period constituted a fixed term or “definite term” contract.

[50] Absent any express language to the contrary, a probationary term of employment is best understood as part of a contract of employment where: a) the employee is held to the requirement that for a specific period of time that employee must demonstrate certain suitability requirements set by the employer; and b) the employee may be dismissed without reasonable notice (subject to statutory minimums) if he or she does not meet the suitability requirements. If the employee meets the suitability requirements then, after that period of probationary assessment, the employee’s contract continues as a contract of employment wherein the requirements of just cause and reasonable notice apply.

In Nagribianko, the lack of suitability cited was that a key customer refused to deal with the employee. No reason or explanation was provided for this refusal in the court’s decision, but this basis might prove troublesome for future employers. If a customer makes such a refusal for any discriminatory purposes, the employer would still likely be in contravention of the Human Rights Code, and may run afoul of anti-harassment amendments to the Occupational Health and Safety Act if this customer is aggressive or abusive towards the employee.

Probationary periods may also fail in properly assessing the suitability of an employee, and not just because they fall short of Gladwell’s 10,000 hours. In fact, Gladwell’s premise itself appears to be scientifically invalid

Dr. Fiona McQuarrie examined the ideological premises behind Gladwell’s 10,000 hour rule, and found that Gladwell has overgeneralized whatever little research there is on the subject, and used that research inappropriately,

The 10,000 hour figure is mentioned in the study in the authors’ reference to how they “examine[d] the effects of over 10,000 [hours] of deliberate practice extended over more than a decade” (p. 393-394). But they did not find that 10,000 hours was the “magic number of greatness” that Gladwell claims. They found that it was quality of time, rather than quantity, that made the most difference in levels of achievement, and that the high performers accumulated approximately 8,000 – not 10,000 – hours of practice.

In one of Gladwell’s other studies, it is the quality of the time spent, not just the quantity, that made the biggest difference in achievement. Outliers makes for an interesting read, but it’s really a completely flawed piece, apparently developed more for public popularity and book sales than dissemination of poignant revelations.

Time is not what develops expertise. What is done within that time may. Even then, every individual comes to a vocational context with a broad spectrum of different life skills and experiences. Gladwell himself came from an ultra-privileged background that uniquely prepared him for the role of cannibalizing pop psychology, distorting it, and monetizing off the process.

Astute employers should realize the negligible benefits that probationary periods often provide them, and instead focus on the training and supports they provide new hires. A flexible, customizable, and dynamic employee orientation and training, combined with a positive and supportive work environment, will typically provide the best employees to demonstrate their adaptability and suitability for the role. The amount of time in that role alone will not. Although probationary periods may serve administrative advantages for some positions, the pressures of a probationary period may actually decrease performance due unnecessarily increasing stress and anxiety on the job if they are coupled without appropriate supports.

Given the prevalence of probationary periods, employers may wish to reconsider them if they are being used as legal risk mitigation strategy. Their legal obligations will remain the same, and they may risk confusing managers, supervisors, and the employees involved, if the appropriate roles are not clarified.

 

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