Probationary periods in employment contracts are an important part of workplace law in Australia. A probationary period is an amount of time that enables employers and employees to assess the suitability of the employment relationship and is usually described in an employment contract.
In this article, we’re going to detail the law surrounding probationary periods in employment contracts. We will look at the following topics and you can skip ahead to the relevant section by clicking the link below:
What is an employment probationary period?
An employment probationary period is the length of time that an employer and an employee must decide whether the employment relationship is suitable. If the employment relationship isn’t working for either the employer or the employee, either party can terminate the employment contract.
The notice period required to terminate an employment contract during the probationary period is generally less than the notice required after the probationary period has expired.
For example, only one weeks’ notice may be required during the probationary period, whereas two weeks, one month or even three months’ notice may be required to terminate an employment contract after the probationary period has ended.
An employment contract review may determine what the appropriate probationary period is, or what is specified in the employment contract.
What does the Fair Work Act say about probationary periods?
The Fair Work Act 2009 (Cth) does not define what a probationary period is. An employer sets the probationary period in an employment contract, which an employee must agree to.
The probationary period described in an employment contract is usually between three to six months. Technically, an employer can set any period as the ‘probationary period’ in an employment contract, however as we shall discuss later in the article; there is little point in setting the probationary period for a term longer than six months.
This is one of the reasons it is a smart call to get an employment contract review.
Why is a probationary period important?
A probationary period is an important aspect of an employment contract. It is important for several reasons that are described below.
Probationary periods and setting expectations
Employment contract probationary periods set expectations. Both the employer and the employee understand that there is a testing period where each party can assess whether the employment relationship is worth pursuing.
For an employer, the probationary period allows an assessment as to whether the employee’s skills and experience match the employer’s expectations during the interview process. For an employee, it allows time to assess the work culture, duties and expectations surrounding the role and whether the employer’s description of the job lines up to what was said during the interview process.
Before this expectation-setting period starts, it is always advisable to undertake an employment contract review.
Termination of employment during a probationary period
Although the Fair Work Act 2009 (Cth) does not define what a probationary period is, the concept of a probationary period becomes relevant when it comes to unfair dismissal.
To meet the jurisdictional threshold relating to tenure with respect to an unfair dismissal claim, an employee:
that is employed by a small business (meaning an employer entity with fewer than 15 employees cannot make an application for an unfair dismissal remedy if have been employed for less than 12 months
that is employed by a larger business (where the employer has more than 15 employees) cannot make an application if they have worked less than 6 months
382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
383 Meaning of minimum employment period
The minimum employment period is:
a) if the employer is not a small business employer—6 months ending at the earlier of the following times:
(i) the time when the person is given notice of the dismissal;
(ii) immediately before the dismissal; or
(b) if the employer is a small business employer—one year ending at that time.
What happens if the probationary period in an employment contract is different to the Fair Work Act?
There is no relationship between the Fair Work Act unfair dismissal tenure threshold and an employment contract.
If a probationary period is less than the relevant threshold in the Fair Work Act (6 months for larger businesses and 12 months for small businesses), and an employer seeks to dismiss the employee after the probationary period described in the employment contract but before the tenure threshold, things can get complicated.
Example: An employment contract provides for a probationary period of 3 months. An employee successfully passes their 3-month probationary period. However, after 5 months the large business employer decides to dismiss the employee.
The employee will not be entitled to bring an unfair dismissal claim (because the 6-month threshold has not been met under s 383 of the Fair Work Act). However, the employee can sue the employer for breach of contract. To determine whether an employment contract has been breached, it is necessary to undertake an employment contract review.
On the other hand, if a probationary period stated in an employment contract is greater than the minimum employment period, the employee will nevertheless be entitled to an unfair dismissal remedy. In this scenario, to the extent the probationary period exceeds the minimum employment period, it is largely redundant.
What happens if there is no probationary period in an employment contract?
An employment contract review should pick up if there is no probationary period described in an employment contract.
However, if this process has been skipped over and the employment contract is silent regarding the probationary period, then:
the employer can only terminate the employment contract in accordance with the terms of the contract (and no contractual probationary period applies); and
the employee can only seek an unfair dismissal remedy after the minimum employment period.
Can a probationary period in an employment contract be extended?
A probationary period can only be extended if an employee agrees.
If a probationary period is extended beyond the minimum employment period, the agreement to extend the probationary period will not override the Fair Work Act. This means that as soon as the employment continues beyond 6 months (or 12 months in the case of a small business), the employee has access to the unfair dismissal protections.
If you are unsure whether a probationary period can be extended, you should seek an employment contract review.
Examples of legal cases relating to employment probationary periods
The employee was a chef and food safety trainer. The employee started her employment with St Michael’s in March 2018. The employment provided for a probationary period of 6 months.
During the probationary period, the employer raised performance issues with the employee.
At the end of the 6-month probation period, the employer extended the probation period for a further 3 months, and started to performance manage the employee.
When the performance management process started, the employee was only meeting expectations in one out of ten criteria. By November 2018, the employee was meeting expectations in seven of the criteria, and partially meeting expectations in the remaining three criteria.
At the end of the extended probation period, the employer extended it again for a further two weeks.
The employer subsequently determined that they felt the employee would be unable to demonstrate appropriate levels of efficiency or responsibility in her role, and her employment contract was terminated.
The employee commenced unfair dismissal proceedings in the Fair Work Commission (FWC) alleging that her dismissal was unfair because she was satisfactorily fulfilling the requirements of her position and there was no valid reason to terminate her employment.
The FWC found that although the employer has incorrectly thought it had the right to terminate the employment contract because the employee has not successfully completed the probationary period.
Ultimately, the FWC found that the employee was entitled to seek an unfair dismissal remedy, found that the employee was unfairly dismissed and awarded compensation to the employee of over $8,000.
How can Prosper Law help?
Prosper Law’s legal services are provided by Farrah Motley, an Australian lawyer that can assist with your employment contract review.
Contact the team at Prosper Law today to discuss how we can provide you with workplace legal advice for a fixed fee.
Farrah Motley | Legal Principal
PROSPER LAW - A Commercial Law Firm for Businesses
M: 0422 721 121
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