Fired During the Probationary Period - The Suitability Test
Ms. Dalskog was hired as Executive Director of the Crowsnest Pass Ecomuseum Trust Society in April 2017, pursuant to a contract that specified a six month probationary period. A little over 5 months later, she was dismissed.
The reasons were myriad. There was conflict between her and some of the Board members, and they were not happy with her performance, including that she missed the deadline to apply for an $18,000 grant, and there were budget overruns in certain areas. However, there were other important facts as well: The Society had promised on-the-job training, which was never provided. The Society had promised to hire a bookkeeper, because they understood when hiring Ms. Dalskog that she did not have bookkeeping experience, and they failed to do so - which meant that a large portion of her time was spend working with the books, instead of the job that she was actually hired to do. She required and sought advice and direction from Board members regarding the completion of the grant application, and she was brushed aside when making those requests.
In a nutshell, she was set up to fail.
The termination meeting, itself, was particularly chaotic. The Board called her in to a meeting without any advance notice or warning, where she was interrogated in a disorganized fashion on a number of topics. She was subjected to name-calling and personal attacks. Finally, she was told that the Society was being dissolved and she was being dismissed.
Ms. Dalskog, representing herself, sued in wrongful dismissal in Provincial Court. The Society took the position that, as a probationary employee, she was not entitled to any notice of termination or pay in lieu. The Court's decision can be found here.
One of the perennial questions in cases of this nature is this: What does the probationary language in the contract mean?
The Plaintiff took the position that the probationary language just referred to the salary review. The Defendant argued that it is understood to be a period during which the 'suitability' of the employee is to be assessed.
The Court sided with the Defendant on this point. However, that is not the end of the analysis. While many people think that probationary language means that the employee can be dismissed at any time, for any reason, without notice, the judicial consensus has been that there is a legal test that requires the employer to afford a reasonable opportunity to the employee to demonstrate suitability to the position, and to assess suitability in good faith, in order to terminate on the basis of a probationary failure to demonstrate suitability.
This is not a heavily objective test. Unlike just cause, which requires the employer to establish a threshold level of seriousness, the 'suitability' test does not require the employer to prove that the employee did something 'bad enough' to warrant summary dismissal. The test turns on process and good faith. (Remember how I argued recently that the field of employment law doesn't need Bhasin to integrate good faith obligations? This case is a great example of a discussion of Bhasin-style obligations arising from precedents that significantly predated Bhasin itself.) If I terminate a perfectly competent and hard-working probationary employee because the 'fit' turned out not to be right - nothing I can put my finger on that he did wrong, but just a lack of chemistry - that would satisfy my obligations as an employer. If I terminate a lazy and incompetent probationary employee because I lost funding for the position, on the other hand, that would not be an appropriate probationary dismissal.
In this case, the employer failed to afford Ms. Dalskog with an appropriate opportunity to demonstrate her suitability for the position to which she was hired, and the employer moreover failed to assess her suitability in good faith. As such, she was wrongfully dismissed.
The judge awarded a two month notice period, and a modest amount of aggravated damages.
While this is a good decision overall, there are some issues that call for further exploration. Some of it is likely driven by the fact that Ms. Dalskog was self-represented.
The contract itself purported to be for a fixed term of two years, and the implied term of reasonable notice applies only to indefinite term contracts. A Bardal analysis, which the trial judge applied, has no place in consideration of a fixed term contract.
When an employer terminates a fixed term contract early, in the absence of some valid 'early termination' language in the contract itself, the employee's damages are usually regarded as being the amount of income she would have earned over the entire remaining term of the contract. In this case, Ms. Dalskog's damages shouldn't have been 9 weeks, but nearly 19 months.
(There is a caveat for mitigation: Historically, it would have been pretty uncontroversial that these damages would have been subject to an obligation to mitigate. However, there's a relatively recent case out of the Ontario Court of Appeal where mitigation obligations were found to be excluded in cases of fixed term employment contracts. There are good reasons to question whether or not this conclusion was appropriate, but Alberta courts have not yet weighed in, one way or another.)
The trial judge was alive to the issue of the fixed term contract: "In the normal course, the damages for wrongful termination of a fixed term employment contract is the balance of the term, less any salary earned at a replacement job in mitigation."
The trouble was that the plaintiff under-pleaded, seeking only $5,832 in lost income damages. So while the trial judge - noting that the overall claim was for $35,000 (including aggravated damages), and that the defendant had notice of all the heads of damages claimed - awarded $9,150 in respect of 9 weeks' lost income, a claim in respect of 19 months' would have been well over the maximum monetary jurisdiction of the Provincial Court, and arguably prejudicial to the defendants for being substantially higher than the overall amount of her claim.
Had the plaintiff claimed for $50,000 based on lost income over the unexpired term of the employment contract, there's little question in my mind that she would have gotten it. And there's a legitimate question to be asked as to what to do with the underpleading issue...but applying a Bardal analysis to get a damages number that's not so much higher than the amount pleaded is, with all due respect, an incorrect conclusion at law.
This is a challenge faced by Small Claims Courts (and, to a lesser extent, Superior Courts) all over the country: How much leeway do we grant to self-represented litigants who make technical or procedural missteps? Underpleading a claim is a relatively unusual iteration of the problem - assessing a $75,000 claim at only $5000 is far less common than the inverse - but it raises serious problems in that the plaintiff has suffered a wrong, and for the courts to turn a blind eye to the substantive damages because of a technical error is problematic.
On the other hand, there's a concern about prejudice to the defendant. If I'm preparing for trial on the basis of the claim as written, changing the claim at trial is kind of like moving the goalposts at the last minute, and that can really impact the fairness of the process. This should be the driving concern in this context: If the trial judge permitted an amendment at trial to change the amount of the lost income claim to $50,000, would the defendant be prejudiced by that? On the facts, it's hard to see how. The only issue that would need to be addressed at trial in a substantially different way would be mitigation (assuming that Alberta does not follow the Ontario example in this area), and even then this would likely be easily addressed at trial. The disclosure obligations at Provincial Court are not as robust as in the Court of Queen's Bench, and so, from an employer's perspective, a good cross-examination on mitigation, bolstered by an argument for an adverse inference based on the failure to produce corroborating records, is sometimes as good as it gets. If the plaintiff can convincingly testify that she took reasonable efforts to secure replacement employment, and that her replacement earnings have been limited to x, that would be an adequate basis for the court to reach an appropriate finding on mitigation. And if she can't convincingly testify to that effect, then you use the adverse inference from the production failure to generously discount her entitlements.
Or, in a pinch, you adjourn the trial to facilitate an appropriate and fair hearing on the merits of the mitigation issue; to the extent this may drive up costs for the parties, that can be dealt with after the trial is completed on the merits.
(The analysis is, perhaps, further complicated by the fact that the trial took place before the term of the contract was up. There are ways of dealing with that, though.)
To the extent that the employer tried to rely on the probationary language in the contract, there are other problems. Given the disposition of the issue, these problems are unimportant - other ways of getting at the same result.
One issue is the timeline.
There is no reference to any discussions, prior to the signing of the contract, of a probationary period. So consider the course of events: You offer me a job, I accept the job, I give notice to my old job, I relocate from another Province, and THEN you tell me, "Oh, by the way, there's a six month probationary period."
This isn't unheard of. The fact that she quit her old job and relocated is strong evidence that there was a contract of employment entered into, but the critical elements here are offer and acceptance: As of February 2017, a verbal contract of employment existed. An additional contract agreed to after that date will be void for lack of consideration, unless the employer can show that she received something new for signing the later contract. Having your employees sign a contract as part of the onboarding process on the first day of employment is a terrible practice, and will usually put the employer in the position of being unable to rely on any protections contained in that contract.
Remember, probation is not automatic. If you don't contract for it, you don't get it.
So the probationary clause could potentially have been voided on that basis, too.
The trial judge's conclusion that probationary clauses are understood to allow for termination without reasonable notice...is a common judicial approach in these cases.
However, it is also a problematic one. The trouble is that it has to build a lot of content into that one little word, 'probation'.
You see, a probationary period at the beginning of employment is commonly understood as allowing an employer to terminate without cause and without any notice at all. It sometimes means something a little different; some contracts will actively define the term. But it might well be fair to say that this is a broadly enough understood meaning that this, more-or-less, is what the language is taken as meaning.
However, for a six month probation period, it simply can't authorize termination without notice in such a straightforward manner. At that point, employees have a statutory right to a minimum amount of notice or pay in lieu under the Employment Standards Code; an interpretation of the provision as authorizing termination without notice would be self-defeating, voiding the provision by operation of statute.
The only way of saving such a proposition would be by integrating the Code standards into the interpretation of the word, probation - reading it as having a built-in employment standards saving clause. Frankly, it's rather absurd to think that this single word is understood by the parties as opening up such a complex framework.
I have long been of the view that an employer that wants a "I can fire you without notice" 3 month probation clause should put that quite expressly in the contract; and an employer that wants a longer probation clause should have to spell out the impact of the probation language in a way that complies with employment standards legislation. (Though, really, here's the kicker: A straightforward employment standards only termination clause, if enforceable, would allow the employer to dismiss the employee on the Code minimums regardless of whether or not it satisfies the suitability test. Probationary language creates an unnecessarily high hurdle to jump through.)
Thus, another mechanism for reaching the same result. (That being said, while the 'fresh consideration' issue is well established on the established jurisprudence, this particular issue is not.)
All things considered, you'd call this a big win for a self-represented litigant. She went to court on her own, paid nothing to a lawyer or agent, and got a judgment for over $12,000.
Not bad.
Had she hired a lawyer, however, it's not a big stretch to think she might have done better. She underpleaded her lost income damages, and could presumably have obtained a much larger judgment otherwise. (The one caveat is, of course, mitigation.) Probably to a significantly larger degree than the legal fees she would have incurred in the process.
Moreover, it's not a stretch to think that this file could have been settled, if she'd been represented. Aside from underpleading her lost income damages, she dramatically overpleaded her aggravated/punitive damages. It's a big win to have gotten $3500 in aggravated damages, as she did; claiming $30,000 in aggravated and punitive damages suggests an unrealistic assessment of the basis upon which these damages are awarded. It ties the employer's hands in terms of settlement options: The CRA tends to frown upon settlements with inappropriately large allocations to non-taxable heads of damages.
With a lawyer on her side making a cogent $75,000 claim for lost income damages, while seeking a proportionately smaller amount of aggravated damages, she would have had a much better bargaining position. Moreover, while lawyers have a harder time settling issues involving complex factual disputes, a straightforward matter of contractual interpretation, such as the consideration issue, might have put her lawyer in a position of being able to reasonably confidently refute opposing counsel's insistence that she was probationary. Her lawyer would have had a pretty strong pitch for an early settlement at a relatively high level, and the employer's lawyer would have had every reason to encourage her client to come to the table in a serious way.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
The reasons were myriad. There was conflict between her and some of the Board members, and they were not happy with her performance, including that she missed the deadline to apply for an $18,000 grant, and there were budget overruns in certain areas. However, there were other important facts as well: The Society had promised on-the-job training, which was never provided. The Society had promised to hire a bookkeeper, because they understood when hiring Ms. Dalskog that she did not have bookkeeping experience, and they failed to do so - which meant that a large portion of her time was spend working with the books, instead of the job that she was actually hired to do. She required and sought advice and direction from Board members regarding the completion of the grant application, and she was brushed aside when making those requests.
In a nutshell, she was set up to fail.
The termination meeting, itself, was particularly chaotic. The Board called her in to a meeting without any advance notice or warning, where she was interrogated in a disorganized fashion on a number of topics. She was subjected to name-calling and personal attacks. Finally, she was told that the Society was being dissolved and she was being dismissed.
Ms. Dalskog, representing herself, sued in wrongful dismissal in Provincial Court. The Society took the position that, as a probationary employee, she was not entitled to any notice of termination or pay in lieu. The Court's decision can be found here.
One of the perennial questions in cases of this nature is this: What does the probationary language in the contract mean?
Contract Term: April 1, 2017 to March 31, 2019. Probationary period of six months shall apply from April 1st, 2017 to September 30th, 2017.
Rate of pay: $25.00 per hour. Revisable at conclusion of the probationary period.
The Plaintiff took the position that the probationary language just referred to the salary review. The Defendant argued that it is understood to be a period during which the 'suitability' of the employee is to be assessed.
The Court sided with the Defendant on this point. However, that is not the end of the analysis. While many people think that probationary language means that the employee can be dismissed at any time, for any reason, without notice, the judicial consensus has been that there is a legal test that requires the employer to afford a reasonable opportunity to the employee to demonstrate suitability to the position, and to assess suitability in good faith, in order to terminate on the basis of a probationary failure to demonstrate suitability.
This is not a heavily objective test. Unlike just cause, which requires the employer to establish a threshold level of seriousness, the 'suitability' test does not require the employer to prove that the employee did something 'bad enough' to warrant summary dismissal. The test turns on process and good faith. (Remember how I argued recently that the field of employment law doesn't need Bhasin to integrate good faith obligations? This case is a great example of a discussion of Bhasin-style obligations arising from precedents that significantly predated Bhasin itself.) If I terminate a perfectly competent and hard-working probationary employee because the 'fit' turned out not to be right - nothing I can put my finger on that he did wrong, but just a lack of chemistry - that would satisfy my obligations as an employer. If I terminate a lazy and incompetent probationary employee because I lost funding for the position, on the other hand, that would not be an appropriate probationary dismissal.
In this case, the employer failed to afford Ms. Dalskog with an appropriate opportunity to demonstrate her suitability for the position to which she was hired, and the employer moreover failed to assess her suitability in good faith. As such, she was wrongfully dismissed.
The judge awarded a two month notice period, and a modest amount of aggravated damages.
Other Considerations
While this is a good decision overall, there are some issues that call for further exploration. Some of it is likely driven by the fact that Ms. Dalskog was self-represented.
The Fixed Term Contract
The contract itself purported to be for a fixed term of two years, and the implied term of reasonable notice applies only to indefinite term contracts. A Bardal analysis, which the trial judge applied, has no place in consideration of a fixed term contract.
When an employer terminates a fixed term contract early, in the absence of some valid 'early termination' language in the contract itself, the employee's damages are usually regarded as being the amount of income she would have earned over the entire remaining term of the contract. In this case, Ms. Dalskog's damages shouldn't have been 9 weeks, but nearly 19 months.
(There is a caveat for mitigation: Historically, it would have been pretty uncontroversial that these damages would have been subject to an obligation to mitigate. However, there's a relatively recent case out of the Ontario Court of Appeal where mitigation obligations were found to be excluded in cases of fixed term employment contracts. There are good reasons to question whether or not this conclusion was appropriate, but Alberta courts have not yet weighed in, one way or another.)
The trial judge was alive to the issue of the fixed term contract: "In the normal course, the damages for wrongful termination of a fixed term employment contract is the balance of the term, less any salary earned at a replacement job in mitigation."
The trouble was that the plaintiff under-pleaded, seeking only $5,832 in lost income damages. So while the trial judge - noting that the overall claim was for $35,000 (including aggravated damages), and that the defendant had notice of all the heads of damages claimed - awarded $9,150 in respect of 9 weeks' lost income, a claim in respect of 19 months' would have been well over the maximum monetary jurisdiction of the Provincial Court, and arguably prejudicial to the defendants for being substantially higher than the overall amount of her claim.
Had the plaintiff claimed for $50,000 based on lost income over the unexpired term of the employment contract, there's little question in my mind that she would have gotten it. And there's a legitimate question to be asked as to what to do with the underpleading issue...but applying a Bardal analysis to get a damages number that's not so much higher than the amount pleaded is, with all due respect, an incorrect conclusion at law.
This is a challenge faced by Small Claims Courts (and, to a lesser extent, Superior Courts) all over the country: How much leeway do we grant to self-represented litigants who make technical or procedural missteps? Underpleading a claim is a relatively unusual iteration of the problem - assessing a $75,000 claim at only $5000 is far less common than the inverse - but it raises serious problems in that the plaintiff has suffered a wrong, and for the courts to turn a blind eye to the substantive damages because of a technical error is problematic.
On the other hand, there's a concern about prejudice to the defendant. If I'm preparing for trial on the basis of the claim as written, changing the claim at trial is kind of like moving the goalposts at the last minute, and that can really impact the fairness of the process. This should be the driving concern in this context: If the trial judge permitted an amendment at trial to change the amount of the lost income claim to $50,000, would the defendant be prejudiced by that? On the facts, it's hard to see how. The only issue that would need to be addressed at trial in a substantially different way would be mitigation (assuming that Alberta does not follow the Ontario example in this area), and even then this would likely be easily addressed at trial. The disclosure obligations at Provincial Court are not as robust as in the Court of Queen's Bench, and so, from an employer's perspective, a good cross-examination on mitigation, bolstered by an argument for an adverse inference based on the failure to produce corroborating records, is sometimes as good as it gets. If the plaintiff can convincingly testify that she took reasonable efforts to secure replacement employment, and that her replacement earnings have been limited to x, that would be an adequate basis for the court to reach an appropriate finding on mitigation. And if she can't convincingly testify to that effect, then you use the adverse inference from the production failure to generously discount her entitlements.
Or, in a pinch, you adjourn the trial to facilitate an appropriate and fair hearing on the merits of the mitigation issue; to the extent this may drive up costs for the parties, that can be dealt with after the trial is completed on the merits.
(The analysis is, perhaps, further complicated by the fact that the trial took place before the term of the contract was up. There are ways of dealing with that, though.)
The Consideration Problem
To the extent that the employer tried to rely on the probationary language in the contract, there are other problems. Given the disposition of the issue, these problems are unimportant - other ways of getting at the same result.
One issue is the timeline.
11. Shortly after that second phone interview [in February 2017], Ms. Hruby phoned Ms. Dalskog and offered her the job. Ms. Dalskog accepted on the phone. Ms. Hruby said that she would stay on for two weeks to train and orient Ms. Dalskog. It was agreed that Ms. Dalskog would start work on April 1, 2017, because she had to give notice to her other job. Ms. Hruby sent her a draft of the proposed employment contract (“the Contract”), sometime after that phone call, but before Ms. Dalskog arrived in the Crowsnest Pass, so Ms. Dalskog could provide proof of employment to potential landlords.
12. April 1, 2017 fell on a Saturday, so it was agreed that Ms. Dalskog would start work the following Monday, which was April 3, 2017. Ms. Dalskog showed up for work that morning, and was met by Ms. Hruby, who showed her around. The Contract was signed that day.
There is no reference to any discussions, prior to the signing of the contract, of a probationary period. So consider the course of events: You offer me a job, I accept the job, I give notice to my old job, I relocate from another Province, and THEN you tell me, "Oh, by the way, there's a six month probationary period."
This isn't unheard of. The fact that she quit her old job and relocated is strong evidence that there was a contract of employment entered into, but the critical elements here are offer and acceptance: As of February 2017, a verbal contract of employment existed. An additional contract agreed to after that date will be void for lack of consideration, unless the employer can show that she received something new for signing the later contract. Having your employees sign a contract as part of the onboarding process on the first day of employment is a terrible practice, and will usually put the employer in the position of being unable to rely on any protections contained in that contract.
Remember, probation is not automatic. If you don't contract for it, you don't get it.
So the probationary clause could potentially have been voided on that basis, too.
The Statutory Issue
The trial judge's conclusion that probationary clauses are understood to allow for termination without reasonable notice...is a common judicial approach in these cases.
However, it is also a problematic one. The trouble is that it has to build a lot of content into that one little word, 'probation'.
You see, a probationary period at the beginning of employment is commonly understood as allowing an employer to terminate without cause and without any notice at all. It sometimes means something a little different; some contracts will actively define the term. But it might well be fair to say that this is a broadly enough understood meaning that this, more-or-less, is what the language is taken as meaning.
However, for a six month probation period, it simply can't authorize termination without notice in such a straightforward manner. At that point, employees have a statutory right to a minimum amount of notice or pay in lieu under the Employment Standards Code; an interpretation of the provision as authorizing termination without notice would be self-defeating, voiding the provision by operation of statute.
The only way of saving such a proposition would be by integrating the Code standards into the interpretation of the word, probation - reading it as having a built-in employment standards saving clause. Frankly, it's rather absurd to think that this single word is understood by the parties as opening up such a complex framework.
I have long been of the view that an employer that wants a "I can fire you without notice" 3 month probation clause should put that quite expressly in the contract; and an employer that wants a longer probation clause should have to spell out the impact of the probation language in a way that complies with employment standards legislation. (Though, really, here's the kicker: A straightforward employment standards only termination clause, if enforceable, would allow the employer to dismiss the employee on the Code minimums regardless of whether or not it satisfies the suitability test. Probationary language creates an unnecessarily high hurdle to jump through.)
Thus, another mechanism for reaching the same result. (That being said, while the 'fresh consideration' issue is well established on the established jurisprudence, this particular issue is not.)
The Value of Counsel
All things considered, you'd call this a big win for a self-represented litigant. She went to court on her own, paid nothing to a lawyer or agent, and got a judgment for over $12,000.
Not bad.
Had she hired a lawyer, however, it's not a big stretch to think she might have done better. She underpleaded her lost income damages, and could presumably have obtained a much larger judgment otherwise. (The one caveat is, of course, mitigation.) Probably to a significantly larger degree than the legal fees she would have incurred in the process.
Moreover, it's not a stretch to think that this file could have been settled, if she'd been represented. Aside from underpleading her lost income damages, she dramatically overpleaded her aggravated/punitive damages. It's a big win to have gotten $3500 in aggravated damages, as she did; claiming $30,000 in aggravated and punitive damages suggests an unrealistic assessment of the basis upon which these damages are awarded. It ties the employer's hands in terms of settlement options: The CRA tends to frown upon settlements with inappropriately large allocations to non-taxable heads of damages.
With a lawyer on her side making a cogent $75,000 claim for lost income damages, while seeking a proportionately smaller amount of aggravated damages, she would have had a much better bargaining position. Moreover, while lawyers have a harder time settling issues involving complex factual disputes, a straightforward matter of contractual interpretation, such as the consideration issue, might have put her lawyer in a position of being able to reasonably confidently refute opposing counsel's insistence that she was probationary. Her lawyer would have had a pretty strong pitch for an early settlement at a relatively high level, and the employer's lawyer would have had every reason to encourage her client to come to the table in a serious way.
*****
Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.
This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
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