Probationary periods are a common component in contracts, but are they clearly understood?
In Australia employment contracts have a clause for a probationary period, if this is not understood it can put the employer at risk of unfair dismissal claims.
Often, the probationary period is a term of three or six months during which either party can terminate the contract with a limited notice period, such as one week notice. If the employee passes the probationary period the employee can be terminated but requires a longer period of notice, say four weeks.
There is not additional security beyond a longer period of notice, and no free-for-all once an employee passes the magic date. Probationary periods are often used for unfair dismissal protection, which is six months (or 12 months if an employer is a small business with less than 15 employees).
Once the qualifying period has been reached the employee is rewarded with unfair dismissal protection (assuming all other eligible requirements are met). Meaning the employer must follow a dismissal process and be able to justify the reason for termination.
Probationary periods are often six months and seen as a milestone, however, these periods can run independently. If an employee passes a three-month probation but is dismissed before the qualifying period of six months, they do not qualify for unfair dismissal protection.
Extending the probationary period does not deprive the employee the right to make an unfair dismissal claim.
Some employers feel there is a benefit of extending a probationary period beyond the six months to nine months, for example, ignoring the fact that the contract extension may be invalid and gives the employee a false sense of security and acting with a free range.
If the employee does not pass the extended probationary period and is terminated without due process or explanation, the employee can bring an unfair dismissal claim, since they have passed the qualifying period and will likely be successful. Employers should also not operate under the assumption they can act without consequence within a probationary period.
Although unfair dismissal protection only commences after six months of service, there is no service requirement for general protections application. Meaning an employee can allege dismissal for protected attribute – such as taking sick leave, becoming pregnant, making other complaints and could be successful.
Employers often believe they do not need to provide a reason for dismissal during the probationary period, although this may technically be true, it can lead the employee to assume the dismissal was motivated by an illegal reason. Then, if the employer needs to defend the claim the employer cannot relay on simultaneous evidence for dismissal as none was provided at the time.
So, while probationary period is considered important for both employers and employees, the real milestone is the qualifying period of six months, regardless of any probationary period.
The takeaway is, never extend the probationary period beyond six months and provide an honest reason for dismissal, within the six month period even if you don’t think it is required.