Does an employer require “just cause” to terminate the employment of an employee “on probation”? For the reasons that will follow, I would submit that, in Ontario, provided that the employer is provincially regulated, they do not.
I agree that my position would appear to stand at odds with the following statement made by the Honourable Justice Epstein in Mison v. Bank of Nova Scotia, 1994 CanLII 7383 (ON SC):
 … an employer can only dismiss a probationary employee for just cause.
Context Matters: The Employer in Mison was a Bank
Although the significance of this fact may not be immediately obvious to those who do not practice employment law, the employer in the Mison case was a bank.
Why does that fact matter? Because banks are governed by federal law, a fact, which, again unless you practice employment law, also probably means very little to you.
Which brings me to my point: A federally regulated employer, such as a bank, absolutely requires just cause to terminate the employment of most of its employees. As confirmed by the Supreme Court of Canada in Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 (CanLII), which case I summarized in the post No Cause? Then No Dismissal for Non-Unionized Federal Employees – The Supreme Court of Canada Shakes Up Canadian Employment Law, federally regulated employers, such as banks, require just cause to terminate a non-managerial employee employed for more than 12 months, unless the employer is eliminating the position.
Why Does it Matter that Federally Regulated Employers Require Just Cause to Terminate Employees?
The relevance of the fact that federally regulated employers require just cause to terminate the employment of employees is this: While it is now settled law that a federally regulated employer cannot terminate the employment of most of its employees absent just cause, it is long-settled law that provincially regulated employers most certainly can terminate an employee’s employment without cause. This point was made abundantly clear by Justice Stratas in his reasons for decision on behalf of the Federal Court of Appeal in Wilson v. Atomic Energy of Canada Limited, 2015 FCA 17 (CanLII):
 At common law, an employer can dismiss a non-unionized employee without cause, but is liable to provide reasonable notice or compensation for same. Put another way, an employee dismissed without cause but given reasonable notice is not wrongfully dismissed.
So, before moving on to my final point here is what is for certain thus far:
- Federally regulated employer: Just cause required for termination.
- Provincially regulated employer: Just cause not required for termination.
Justice Epstein’s Statement Has Been Misapplied
In my anticipatory tweet to this post I wrote, “Why the statement "... an employer can only dismiss a probationary employee for just cause." is both right AND wrong.”
As to the statement being correct, I believe the proclamation that Justice Epstein intended to make in Mison was this: Because the plaintiff in this case was employed by a bank, and because banks do require just cause to terminate an employee’s employment [the points made above], Mr. Mison’s probationary status did not vitiate the obligation on the employer to have just cause. Put another, the fact that the employer was federally regulated trumped the fact that the employee was on probation. At least, that is my assessment of her decision.
The problem is that Justice Epstein did not make that point as express as I just did. In fact, Her Honour made no mention of the fact that the bank was a bank – perhaps because it was so obvious.
But the fact that the bank was a bank – or better said, the fact that Mr. Mison’s employment was governed by federal employment standards – is not immediately obvious unless you practice in this area. I will concede that this nuance was not immediately obvious to me either.
What this nuance means, I would submit, is that the decision has been misapplied in the years following its release.
A perfect example of the misapplication of the Mison decision is the case of Alexander v. Padinox Inc., 1999 CanLII 4542 (PE SCAD), a 1999 decision of the Appeal Division of the Prince Edward Island Supreme Court. [And if you think that’s obscure reference for an Ontario employment law blog, consider this fact, I have previously written about a decision from the Northwest Territories Human Rights Tribunal, see Human Rights Adjudicator Allows Employee to Take Entire Summer Off to Care for Disabled Child.]
Padinox concerned the appeal of a dismissal of a wrongful dismissal action brought by George Alexander. In June 1997, Mr. Alexander responded to an advertisement placed in the Toronto Star by Padinox Inc. seeking an individual to fill the position of “Operations Production Supervisor” at its plant in Charlottetown, PEI. Padinox is involved in the manufacture and sale of metal cookware and Mr. Alexander, who lived most of his life in Ontario, had previous managerial experience in that industry as well as other manufacturing industries.
After being interviewed by the Operations Manager, Mr. Alexander received an offer of employment from Padinox on May 25, 1997, which he accepted. That offer and his acceptance constitute the contract of employment. A relevant term of the contract of employment was that there was to be a probationary period of up to one year during which time the management of Padinox had the discretion to confirm or reject Mr. Alexander for the position.
In the fall of 1997 there were production problems in the company’s plant. Those problems prompted the company, in November 1997, to dismiss the operations manager, the person to whom Mr. Alexander reported directly. The operations manager was replaced by the vice-president of finance, who became responsible for both positions.
In December the draw press, which is a crucial piece of equipment in the production of the product, was sent out for annual maintenance or retrofit. When it was returned, it did not work properly and further repairs had to be completed at the plant before production could recommence. It was during this crisis that the vice-president of finance, to whom Mr. Alexander was now reporting, says he lost confidence in the abilities of Mr. Alexander to perform his duties as outlined in the contract of employment. Around this time Mr. Alexander inquired of the vice-president of finance as to how he was doing, and in reply he was told to read his job description. Approximately two weeks after this conversation Mr. Alexander was advised by the vice-president of finance his employment was terminated and, in lieu of notice, he was paid two weeks’ salary and vacation pay.
Mr. Alexander sued for wrongful dismissal seeking special damages equivalent to eight months’ earnings, special damages for vacation pay and benefits for that eight-month period, as well as general damages, punitive damages and aggravated damages. The action proceeded to trial and the trial judge dismissed Mr. Alexander’s claim in its entirety. The trial judge’s reasons are reported at (1999), 1999 CanLII 4128 (PE SCTD), 175 Nfld. & P.E.I.R. 58.
On appeal to the Appeal Division, the court overturned the decision. The Honorable Mr. Justice John A. McQuaid reasoned as follows:
 The common law has evolved from a position where a probationary employee could be dismissed without cause, without reasons and without notice in the absence of bad faith or improper motive, to a point where now there is recognition that greater fairness should prevail in the termination of a probationary employee. The test has gone beyond the establishment of good faith in the employer’s exercise of discretion…
 In Mison v. Bank of Nova Scotia (1994), 1994 CanLII 7383 (ON SC), 6 C.C.E.L. (2d) 146, supplementary reasons 6 C.C.E.L. (2d) 159 (Ont. Ct. Gen. Div.), Epstein J. acknowledged the passage to a fairer approach in the dismissal of a probationary employee. At para.37 she stated:However, on reviewing more recent authorities, it is clear that there has been some movement toward an attitude of greater fairness in dismissing a probationary employee.
This attitude of greater fairness is practically meaningless unless there is a duty on an employer to exercise discretion on some objective standard.
In the end the court ruled that Padinox had failed to discharge the onus of proving it had cause to dismiss Mr. Alexander as unsuitable for permanent employment and that he was therefore entitled to a greater period of reasonable notice.
Here is why I think those pronouncements are incorrect.
- First, it is clear, settled law that a provincially regulated employer requires neither just cause nor even reason to terminate the employment of an employee who is not on probation. Meaning that those employees who either (a) are not placed on probation, see my next point below, or (b) ‘survive’ the probationary period, most certainly can be terminated without cause or reason.
- Second, the placement of an employee on probation is wholly at the discretion of the employer; there is no automatic probationary period.
- Third, the act of placing an employee “on probation” cannot possibly elevate the employee’s rights; that would be antithetical to the point.
So if all of those points are legally correct, and I would submit that they are, then why is an employer required to demonstrate just cause to terminate the employment of a probationary employee at all? Sure, it’s a modified test under Mison, but still, what is the legal basis for requiring an employer to show fairness to employee to whom it has arguably provided more notice of an intention to ‘fire at will’ than one to whom it has not? It simply makes no sense to me.
As I write this post it is now the middle of November 2016. I am well aware that this blog is followed by a large number of employment lawyers and human resource professionals. I thank you for your interest.
I know some of you will have an opinion on this issue, so I welcome your comments below. Also, as I am arguing this exact point before the Divisional Court on the 30th of November, 2016, if any of you do have opinions, thoughts, etc., I would appreciate them as soon as possible. (Preferably below in the comments field, but by email if you wish to be discrete is fine too.)--
As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.