Do I need to have a probationary period in my contract of employment? What is the difference between a probationary period and the minimum employment period? What does a probationary period actually mean? These are some of the questions we are routinely asked in relation to what is normally a fairly standard contractual term.
In our experience, there is considerable confusion about the difference between a probation period and how this relates to the minimum employment period in the Fair Work Act 2009 (Cth) (“FW Act”).
Probationary periods are contractual clauses which have no statutory force, but provide both the employee and employer an opportunity to assess the employee’s suitability for the role for which they have been recruited. From the perspective of the probationary employee, there is an appreciation that their work performance will be under review and they do not have a guarantee of ongoing employment.
Many probationary clauses provide a lesser notice period for termination of employment during the probationary period as opposed to after the expiration of the probationary period. However, the notice period for termination during a probationary period cannot be less than the minimum periods prescribed in the NES (one week for less than 12 months’ service).
Generally, a probationary period will be for a period of three, six or twelve months (but must be reasonable given the circumstances of employment). You can only extend a probationary period if the contract provides for that extension at the outset of employment, or the employee agrees to the extension at the time it is proposed. However, if the probationary period goes beyond the expiration of the minimum employment period prescribed by the FW Act, unfair dismissal laws will apply.
Probationary employees are not exempt from FW Act unfair dismissal laws unless they are within the minimum employment period(“MEP”) prescribed by the FW Act. The FW Act’s predecessor, the Workplace Relations Act, exempted employees serving a reasonable period of probation from unfair dismissal laws. Probationary employees enjoy the same rights and entitlements as non-probationary employees. They are entitled to all the FW Act National Employment Standard (“NES”) conditions, including paid annual leave, paid personal/carer’s leave and minimum notice periods.
Separate and distinct from the concept of a probationary period, which can apply to any level of employee, the FW Act provides that employees who would otherwise have a claim for unfair dismissal cannot bring such a claim if they have been employed for less than the minimum employment period. For employers with less than 15 employees, that period is 12 months, and for all other employers that period is 6 months. That is the case regardless of whether the employment contract includes a probationary or qualifying period.
Many employers are aware of the minimum employment period requirements and believe it serves to preclude any employee from making claims under the FW Act in circumstances where the employment is terminated within the qualifying period. This is a common misconception and can have significant ramifications for employers, given its limited application. Even if the employee is precluded from commencing an unfair dismissal claim, there are other ways that the dismissed employee can challenge the dismissal. For example:
- General protections application under 365 of FW Act: the decision to dismiss was motivated by an activity or attribute of the employee proscribed as a reason for dismissal under the FW Act general protections provisions (e.g. the employee queried his or her pay or entitlements or made some complaint about his/her employment s 341(1)(c)(ii)). This means that when you decide to dismiss a probationary employee or employee with less service than required by the MEP you should still formulate the reason for dismissal, verify that it is a lawful reason, and be in a position to prove that this was the reason).
- Breach of employment contract: provisions in the employment contract that may entitle the employee to make a claim for breach of contract despite the MEP. This is the reason that probationary periods can be so valuable, as they reduce the risk of such claims.
We regularly advise employers in relation to contract formation and termination issues. If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.