Employment law myth No.5: “If they’re not performing well, I can extend their probation”
Over the next few weeks, we’re dispelling some commonly held employment law misconceptions, in a series of short articles. Warning – may contain spoilers!
Many employers consider that starting new employees off on an initial probationary period is a useful way to assess their suitability for the role, before deciding to offer them permanent employment. Situations often arise where the employer is still unsure at the end of the probationary period whether to offer the employee ongoing work. In such situations, many employers will simply extend the probationary period for another few months to see if the employee is able to lift their game. So long as the employee is aware that their probationary period is being extended, there’s no risk of a claim if they’re let go before the end of probation, right?
It may come as a surprise that probationary periods are not concepts recognised by the unfair dismissal provisions in the Fair Work Act 2009. Once an employee has completed 6 months service (or 12 months service in the case of a “small business employer”) then they will have an ability to bring a claim for unfair dismissal* — regardless of whether they are still within a probationary period or not. As a consequence, for dismissals based on unsatisfactory performance during a probationary period, there will be a risk of a finding against the employer if it has not followed the usual steps the Fair Work Commission expects to be taken for dismissals of this nature (warnings about the need to improve, a formal meeting with the employee and their support person to discuss the employment prior to taking the decision to dismiss, etc).
It is therefore usually advisable that probationary periods are not extended beyond the 6 (or 12) month period. In addition, care should be taken to ensure that any “end of probationary meetings” are scheduled well in advance of the 6 (or 12) month cut off, so as to avoid the possibility of the employee accidentally tipping-over into unfair dismissal territory.
An alternative approach – used by some savvy employers – is to initially engage probationary employees on a fixed-term contract. If an extension to the probationary contract is required, a further fixed term employment contract is entered into. As an unfair dismissal claim cannot be brought where the reason for termination is the expiry of a fixed term contract (see section 386(2)(a) of the Fair Work Act 2009), this provides one way of managing risks where extra time is needed to assess an employee’s suitability.
(*So long as one or more of the following applies: (a) they are covered by a modern award, (b) an enterprise agreement applies to their employment or (c) they earn less than the high income threshold.)