Probationary periods are commonly assumed to give employers broad discretion to dismiss new employees with limited risk or consequence. A recent Ontario Small Claims Court decision cautions that this assumption can prove costly where an employer does not first conduct a careful assessment of the employee’s suitability or clearly limit termination entitlements in the employment agreement.

In Yadav v Ahangama [Yadav], the Ontario Small Claims Court (“ONSCSM”) held that an employer could not rely on a contractual probationary period to dismiss an employee without notice after only ten days of employment. With no contractual limit on his notice entitlement, the court awarded him three months of common law reasonable notice.

Although Yadav was decided by the ONSCSM and does not bind higher courts, it may still carry persuasive weight. That significance may grow as the court’s monetary jurisdiction expands to $50,000 and litigants facing delays in the Ontario Superior Court of Justice increasingly consider it as a forum for wrongful dismissal claims.

Background

The employee was hired as a law clerk under an employment agreement that provided for a three-month probationary period, during which his performance would be reviewed. The agreement did not contain a termination clause.

The employer’s job posting described the position as a senior real estate law clerk role and stated that the firm was seeking someone with two to five years of real estate law experience who could handle files from opening to closing. Although the employee had practiced law internationally for approximately nine years, his resume disclosed that none of that experience involved real estate law. It also showed that he had less than one year of Canadian law clerk experience and was still completing his law clerk program. Despite it being apparent that the employee did not possess the experience or credentials described in the posting, the employer hired him without verifying his qualifications or work history.

During the employee’s first week of work, the employer asked how long he could commit to remaining with the firm. At the employer’s urging, the employee promised to remain for 18 months. The employer also asked the employee to provide three months’ notice if he ever intended to leave the firm.

After his first week, the employee was given his first real estate file to handle independently. The employer observed that the employee “had no idea” how to do so and terminated his employment the following day without notice or pay in lieu. At the termination meeting, the employee was told only that the firm was looking for someone more senior to handle its real estate files.

In email exchanges following the termination, the employee noted to the employer that this was the first time any dissatisfaction with his performance had been raised with him—a claim that the employer did not dispute.  

The employee commenced a wrongful dismissal action. The employer took the position that, because the employee had been dismissed during his probationary period, it was entitled to terminate his employment without cause, notice, or pay in lieu of notice.

Decision

Probationary Employees Must Be Given a Fair Opportunity to Demonstrate Their Suitability

The ONSCSM rejected the employer’s position. Relying on established case law, the court confirmed that that an employer may dismiss a probationary employee without notice only where it has made a good-faith determination that the employee is unsuitable for permanent employment and has first given the employee a fair and reasonable opportunity to demonstrate their suitability. This requires an honest, fair, and reasonable assessment conducted with reasonable diligence, including informing the employee, before or at the outset of employment, of the basis on which their suitability will be assessed.

The ONSCSM found that the employer had not met that standard. The employee was dismissed only ten days into the three-month probationary period, despite the employment agreement expressly stating that his performance would be reviewed in that time. During his brief employment, the employee received no training, feedback, or that his employment was in jeopardy. The ONSCSM also considered it significant that the employer had hired the employee despite knowing from his resume that he lacked the experience and credentials described in the job posting. Rather than verify the employee’s qualifications or provide him with an opportunity to develop or demonstrate the required skills, the employer effectively assessed his suitability on the basis of a single file assigned approximately one week after he began working.

In light of the circumstances, the ONSCSM concluded that the employer had not fairly assessed the employee’s suitability and was therefore unable to rely on the probationary clause.

The Employee Was Entitled to Common Law Reasonable Notice

The ONSCSM held that the employee was entitled to common law reasonable notice because the employment agreement contained no termination clause displacing that entitlement. It further confirmed that, although the Employment Standards Act, 2000 [ESA] does not require employers to provide notice to employees with less than three months’ service, this does not eliminate their right to notice under the common law.

Although the employee had worked for only ten days, the ONSCSM awarded him three months’ pay in lieu of notice. The court noted that in some circumstances, employees with very short service may be entitled to “proportionately longer” notice periods because they may have given up other employment opportunities upon accepting the position and may face additional difficulty explaining an early dismissal to prospective employers. Several of those considerations were present in this case.

In determining the appropriate notice period, the ONSCSM considered the employee’s age and position, the fact that it took him approximately four and a half months to secure new employment, and the fact that other job opportunities he had prior to being hired by the employer were no longer available after his termination. The court also noted that the employer had asked the employee to provide three months’ notice if he chose to resign.

Key Takeaways for Employers

Yadav provides several important reminders for employers managing probationary employees:

• Probation Does Not Eliminate the Need for a Fair Assessment of Suitability: Although employers are not required to establish just cause to terminate a probationary employee, they should be prepared to demonstrate that the decision followed a good-faith assessment of the employee’s suitability, conducted with honesty and diligence. Minimally, this entails:
  • Identifying to the employee the skills, standards, and other criteria on which they will be assessed before or at the beginning of employment. These expectations should be consistent with the job posting, offer letter, and actual requirements of the position.
  • Providing the employee with a genuine opportunity to improve or demonstrate suitability. This may require appropriate training, feedback, supervision, and sufficient time to assess the employee’s performance. A conclusion based on a single assignment—particularly where the employee has received no prior feedback or warning—is likely insufficient.
• Conduct Appropriate Due Diligence Before Hiring: Employers should carefully assess candidates before extending an offer of employment. Where an applicant’s resume discloses that they do not possess the experience or credentials sought, an employer should clarify and verify their qualifications before extending an offer. An employer may have difficulty relying on deficiencies that were apparent when the employee was hired as evidence of their unsuitability for the role, particularly if it does not provide the employee with a fair opportunity to demonstrate or develop the required skills.
  
• Short Service ≠ Short Notice, So Get the Termination Clause Right: In Yadav, the Court relied on prior case law recognizing that employees dismissed after an exceptionally brief period of employment may be entitled to a comparatively longer notice period precisely because of the particular challenges created by such an abrupt termination, including the difficulty of explaining the short tenure to prospective employers and securing comparable work. The decision therefore highlights the importance of an enforceable termination clause operating alongside, rather than in place of, a probationary clause. Had the employment agreement in Yadav contained an enforceable clause limiting the employee’s entitlements to the minimum standards under the ESA, the employer’s liability would likely be substantially reduced, as an employee with less than three months of service is generally not entitled to statutory notice of termination or termination pay.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.