Probationary periods are common – and commonly misunderstood. This can put employers at risk of unfair dismissal claims.
Probationary periods are a common component of employment contracts in Australia. But their provisions are not well understood; what’s more, these provisions have little practical effect.
Generally, a probationary period is a term of three or six months during which each party can terminate the contract on a limited period of notice, such as one week. If an employee ‘passes’ the probationary period then the contract can be terminated by either party with a longer period of notice, say, four weeks.
There is no added security beyond the longer period of notice, and no ‘free-for-all’ within a probationary period that ceases once an employee passes that ‘magic mark’. Probationary periods are often confused with the qualifying period for unfair dismissal protection, which is six months (or 12 months if an employer is a small business with under 15 employees).
Passing the qualifying period is the real milestone as this means an employee is afforded unfair dismissal protection (assuming all other eligibility requirements are met). In turn, this means their employer must follow a dismissal process and have a justifiable reason for termination.
The fact that the probationary period is often also six months is one reason people place additional importance on that milestone. However, these periods operate independently. If an employee has passed a three month probation, but is dismissed before the qualifying period of six months, then they do not qualify for unfair dismissal protection.
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Of more consequence is the fact that extending a probationary period does not deprive an employee of the right to make an unfair dismissal claim.
Sometimes employers see value in extending probationary periods beyond six months to nine months, for example. Ignoring the fact that, as a matter of contract, that extension may not be valid, this gives the employer the false sense of security that they’re acting with a free hand.
However, if the employee is deemed not to pass the extended probationary period and is dismissed 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. Further, employers should not operate under the assumption they can act without consequence within a probationary period.
While unfair dismissal protection only commences after six months of service, there is no service requirement for a general protections application. This means an employee can allege dismissal for a protected attribute – such as taking sick leave, making an employment complaint or becoming pregnant – and could be successful.
Employers often fall into the trap of believing they do not need to provide a reason for dismissal during the qualifying period. While this is technically true when considering the contract and unfair dismissal law, it can encourage an employee to assume the dismissal was motivated by an illegal reason. Then, when defending the claim, the employer cannot rely on contemporaneous evidence providing the reason for dismissal because they did not provide any.
So while probationary periods are often considered important for employers and employees, the real milestone is the qualifying period of six months, regardless of any probationary period.
The lesson for employers is to never extend a probationary period beyond six months and to provide honest reasons for dismissal if within six months, even if you don’t think you’re required to.
Andrew Jewel is a principal at Jewell Hancock Employment Lawyers.
This article first appeared in the February 2021 edition of HRM magazine.