Probation periods

Today's legal update focuses on probation periods - and the common questions asked by employers about their rights and obligations concerning probation periods for new employees.

Does an employer still have to give notice if he or she decides not to keep an employee on during or at the end of the new employee's period of probation?

Yes - unless there has been gross misconduct. Even if an employee has been told he or she is on probation or it is written into the contract of employment, the legal notice obligations do not change.

How much notice needs to be given if an employer wishes to terminate employment during the probation period?

Every employee is entitled to a minimum of one week's notice during the first  year of employment (increasing after that). This applies regardless of any probation period - however communicated , unless there is gross misonduct.

Can the notice requirement for a probationary period be more than one week?

Yes, if the contract stipulates that the employer will give more than one week's notice, the employer is bound by what is in the contract . Notice can not , other than for gross misconduct be less than one week , because that is the statutory entitlement of all employees at commencement of employment.

What if the employer dismisses an employee without notice during the probation period?

If the employer fails to give one week's notice or to give notice in line with the contract (whichever is more) or to make payment in lieu of a notice period , the employee can bring a legal claim for that payment against the employee. The use of a probation period is no defence to this claim.

Can an employee bring a claim for unfair dismissal if notice is given during or immediately after the probation period?

The laws of unfair dismissal apply equally to employees on probation as any other employees. Primarily, an employee employed by any employer which is not a small employer  may bring a claim for unfair dismissal in respect of a period of employment of six months or more. For an employee of a small employer (less than 15 employees), the equivalent period is twelve months. See my last employment law update for some more information about unfair dismissal and small business.

An employee employed for less  than six months by a larger employer or less than twelve months for a smaller employer may not in event bring a claim for unfair dismissal. A dismissal on the basis of an unsuccessful probation period will be no exception to that rule.

What is the legal effect of a probation period?

A probation period sets a line in the sand in terms of expectation on an employee and the timeframe within which the employee is to be monitored closely under any probationary period. It is not a "get out of jail" card for an employer. The rules around notice and unfair dismissal will apply regardless of any label of 'probationary period' placed on an employee -whether in writing or verbally.

An employer should also be aware that any accumulated annual leave, however little , should be paid out on termination.

Do the rules on probationary periods apply to casuals?

Look out for Counsel on Demand's forthcoming legal update on myths around employing casuals for more detailed information about the use of casuals and other categories of employees.

Counsel on Demand specialises in advising businesses on their legal obligations around employing staff- whether full time, part time or casual. Contact Polly Harding if you wish to discuss probation periods or any other legal aspects of employment rights and obligations. 0401 816920

 

 

 

A decision last week by the Fair Work Commission in Sydney highlights small employers' right and obligations concerning unfair dismissal in New South Wales. The case concerned an apprentice butcher, James Deeth, employed at  Milly Hill, a small retail and wholesale butcher based in Kempsey. James Deeth was summarily dismissed (dismissed without notice) by Milly Hill , after he was charged with being an accessory after the fact to murder. The crime had no direct connection to his employer or the business.

Milly Hill, a small business employer, was found by the Commission to have dismissed James Deeth unfairly and to have failed to follow the Small Business Fair Dismissal Code.

Small Business Fair Dismissal Code- what is a small business?

The rules for small business relating to unfair dismissal differ from those for larger businesses. Employees of a small business cannot make a claim for unfair dismissal in the first twelve months following the start of their employment (the period is six months for larger businesses). A small business is defined as one having less than 15 employees (which head count includes regular casual staff). After twelve months , small business employees are able to make such a claim in the event of a dismissal.

In addition, a small business is required to follow the Small Business Fair Dismissal Code in respect of any dismissal of an employee whose employment period has been more than 12 months. The Code does not apply to larger businesses. In the main, if a business follows the Code to the letter , it is likely that a dismissal will be fair. The Code also includes a checklist to assist the employer in deciding whether a dismissal is likely to be fair - while the checklist is not decisive , it does act as a practical procedural guide.

What happened in the Milly Hill case ?

The Fair Work Commission primarily found against Milly Hill because the employer hadn't followed the rules set out in the Small Business Fair Dismissal Code . Under the Code, for a dismissal without notice, the employer has to satisfy two tests. Firstly, the employer must show that he or she believes that the employee's conduct is sufficiently serious to justify instant dismissal. Serious misconduct includes theft, fraud and serious breaches of occupational health and safety procedres. Secondly, the employer must show that there are reasonable grounds for that belief - usually supported by a thorough investigation into the facts leading to the incident leading to the dismissal and its effects.

In the Milly Hill case, the Commission ruled against the employer because he had failed to carry out a proper investigation and formed his opinion as to the seriousness of the conduct without adequate information. For example, he did not give the employee adequate opportunity to tell his side of the story and, in the words of the Commission, 'had a knee jerk reaction to the news that Mr Deeth had been charged '. The Commission also indicated that the employer was more swayed by customer and employee dissatisfaction than he should have been , had he carried out a full investigation into the facts and circumstances.

The case underlines that even though a decision to terminate (even without notice) may be potentially justifiable, getting the procedures wrong around the dismissal can make the dismissal unfair.

Small business owners

All small business owners should be aware of and understand the Small Business Fair Dismissal Code . It sets out a simple process for establishing whether a dismissal is likely to be fair or unfair. The Code covers dismissal without notice for serious misconduct and dismissal following warnings and notice for other dismissals which relate to less serious misconduct.

Counsel on Demand specialises in employment law issues for growing businesses . Call Polly, our principal lawyer on 02 9986 0462.

Legislation passed through the Senate this week means that with effect from 12 November 2016, small businesses, categorised as businesses with less than 20 employees, will have new rights and obligations in respect of inclusions in their own and others' standard terms of business  which may be considered to be unfair under the Australian Competition and Consumer Act. Previously these protections were available only to consumers and not to small business.

Malcolm Turnbull's announcement on Tuesday that the government backed the majority of the recommendations of the Murray Inquiry, including these in relation to unfair contracts, reflected the passage of the relevant Bill through Parliament.

Primarily, a clause in a standard contract which is considered unfair can be struck out - void, in legal language - and therefore ineffective. Clauses such as an automatic renewal provision or which affect or limit a party's remedies under the contract have in the past been found to be unfair in some circumstances.

The contracts to which the new provisions will apply will be capped at $300,000 or $1,000,000 where the contract is for more than one year (for example an ongoing services agreement). A B2B contract between two small businesses will be caught by the provisions .

All businesses providing goods and services to small businesses (including small businesses themselves) will need to review their standard terms for potentially unfair provisions or risk having provisions which they may have previously relied on being considered ineffective.

The change will be effective from 12 November 2016 - potentially affecting standard form contracts entered into at any time from that date. Counsel on Demand will provide further detailed analysis of the changes in future legal updates.