Is a probationary employee entitled to wrongful dismissal damages? Can an employer contract out of these damages? Until now, most Canadian court decisions have held that even a probationary employee is entitled to wrongful dismissal damages. The exception is where the employer uses a properly worded contract. Generally, the contract must specify the length of the period and what, if anything, the employee will be paid if dismissed during the probationary period. An employee must be paid at least one week’s damages if the probationary period is longer than three months, since that is the amount specified by the Ontario Employment Standards Act, 2000. But the contract must specify how much the employee will be paid if dismissed after three months, while still on “probation.”
Surprisingly, this was not the conclusion of the Ontario Court of Appeal in a recent decision. In Nagribianko v. Select Wine Merchants Ltd., the Court reviewed a case that had been to the Ontario Small Claims Court and the Divisional Court. The employee had signed a contract that referenced a six month probationary period. But the contract does not appear to have specified a payment that the employer was required to provide if dismissed after the first three months. This should have made the contract null and void in accordance with the Supreme Court of Canada’s powerful decision in Machtinger v. HOJ Industries Ltd.  1 S.C.R. 986.
The employee had worked for the employer for just less than six months. He was dismissed on a without cause basis. He sued for damages and was awarded four months’ compensation in the Ontario Small Claims Court. The judge ruled that he had been induced to join the employer and that the clause did not effectively oust the employee’s common law entitlement. This seems consistent with most of the case law.
The Ontario Divisional Court reversed the decision and held that the trial judge had failed to give effect to the probationary language. The Ontario Court of Appeal upheld the Divisional Court’s decision and held that the term “probation” was not ambiguous. It ruled that “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 ability.”
The Appeal Court went on to conclude that the employer could not contract out of the minimum standards required by the Ontario Employment Standards Act, 2000 and that therefore the employee was entitled to one weeks’ pay, which the employee received, even though this one week’s pay was apparently not specified in the contract.
This analysis all would have been correct if the contract had specifically stated that the employee could be dismissed after three months but before six months with the payment of one week’s pay and the continuation of one week’s benefits. However, if the contract did not say that specifically, it should have been viewed as a contract that would violate the common law case law as set out in Machtinger v. HOJ. The contract appeared to specify that the employee could be dismissed at any time during the six months as a probationary employee with no notice or payment. The fact that the employer paid the minimum one week’s compensation required by the ESA 2000 ought not to have fixed a poorly drafted contract.
Here, in contrast to the Brake v. PJ-M2R Restaurant Inc. that I looked at last week, the Ontario Court of Appeal weighed in heavily on the side of employers and was quite unsympathetic to what should have been a reasonable employee claim. The decision is good news for Ontario employers, even those with poorly drafted contracts, who may now find it easier and cheaper to dismiss probationary employees. The decision also demonstrates, as I indicated previously, that the outcome of a case at the Ontario Court of Appeal may well depend on the particular panel that is hearing the decision. In this case, justices LaForme, Hourigan and Paciocco have issued a ruling that strongly favours employers and provides quite the contrast with the previous decision that I examined in Brake v. PJ-M2R Restaurant Inc., which went the other way.
Other recent Ontario Court of Appeal decisions have also gone in different directions and I will review two or three more of them in coming blogs. The most significant take-away is probably a strong measure of uncertainty, which underscores the risks inherent in civil ligation and, particularly, in employment law cases.