November 27, 2017
In an unprecedented decision released by the Court of Appeal recently, the Court has found the use of the word “probation” in an Employment Agreement has the meaning that during the stated period of time, employment may be terminated with payment only as is required by the Employment Standards Legislation.
Notwithstanding requirements that contracts be drafted clearly and unambiguously, and the Rules of contra proferentum, which construe any ambiguity against the drafter of the agreement, in a surprising decision, released by a three judge panel of the Ontario Court of Appeal this summer, it was held the use of the simple word “probation” was all that was required to insert a probationary period into any Employment Agreement. The contract in question contained the words “probation…..6 months”. While the Ontario Employment Standards Act only permits a probationary period of three months during which someone can be terminated without any payment at all, the Court concluded that the use of these words would give probation the ordinary meaning as it clearly misrepresents the plain intention of the parties to incorporate that period as a true probationary term.
The Court held:
“The trial judge’s decision to treat the term “probation…..6 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”.
The Court went onto conclude that since it is not possible to contract out of the minimum notice entitlements provided for in the Employment Standards Act, 2000, probationary employees are entitled to receive statutory notice or pay in lieu of that notice after the initial three month period. In this case therefore, the employee was entitled to notice of one week, which the employee had in fact received.
This decision certainly shows a willingness by the Court to read in a significant amount into a very bare provision in an Employment Agreement and may signify a shifting direction in terms of interpretation of contract by this Court.
Notwithstanding the decision, clarity is always encouraged and Employment Contracts should be drafted so on a clear reading, it is certain to an employee what notice the employer is going to be obliged to provide, and that such notice of course, comply with at least the minimum requirements of the applicable legislation.