LEGISLATIVE NEWS

Probationary Periods Effective Tool; Misconceptions Common

My company uses a 90-day probationary period to protect ourselves from wrongful termination lawsuits if we need to fire a new employee. However, I’ve heard this might contradict our “at-will” policy. Should we keep using a probationary period?

Probationary periods, better termed “introductory periods,” can be an effective tool for you to evaluate performance and limit benefits eligibility for new hires. However, the following misconceptions about introductory periods are common:

Misconception #1

Introductory periods contradict at-will employment.
You may have heard that employment should be at-will from the first day, and that having an introductory period implies secure or guaranteed employment once the period is successfully completed.

However, the California Supreme Court recently clarified, in Dore v. Arnold Worldwide Inc., that simply having an introductory period does not contradict an employer’s at-will policy. As long as it is made clear that employment is at-will throughout the duration of employment, having an introductory period is fine.

Misconception #2

An employee can be let go for any reason during the introductory period.
You might terminate an employee during an introductory period, telling the employee “it just didn’t work out.” Many employers assume they are protected from wrongful termination or other lawsuits during any period they’ve defined as introductory. However, employees are protected from being fired for illegal reasons from the first moment they come to work for you.

An employee terminated during the introductory period might claim the termination was due to discrimination based on race, sex, national origin or any of the other classes protected by law.

Other claims might include wrongful termination in retaliation for reporting sexual harassment or for filing a workers’ compensation claim.

Terminating an employee during an introductory period provides no legal protection against these claims. Therefore, you should always document a legitimate, non-discriminatory reason for terminating an employee, even within the introductory period.

Misconception #3

Once the introductory period is over, it’s a lot harder to fire the employee.
Introductory periods by themselves do not provide any particular legal protection to employers. Employment should clearly be at-will, both during the introductory period and for the entire duration of employment. Some keys to protecting yourself from legal claims stemming from introductory periods are:

● Have clear statements that employment is at-will in all employment documents, such as employee handbooks, offer letters, performance reviews, etc.
● Don’t indicate that once an employee “passes probation,” he/she becomes a “permanent employee.” Those terms directly contradict the concept of at-will employment.
● Train managers so they know not to create oral contracts of employment by saying things such as “We’re glad you’re on board for the long haul” or “As long as you do a good job, you’ll have a job with us.”

Misconception #4

Introductory periods protect employers from unemployment insurance (UI) claims.
Employees are eligible for UI benefits even if they are terminated during an introductory period. To calculate an employee’s UI benefit, the state looks at a “base period” of one year, starting anywhere from three to six months before the termination (depending on what month the claim begins in). Only employers who paid wages to the employee in the base period have charges made to their reserve account for that claim.

You would not be a base period employer for an employee who worked for you for less than three months. However, your UI reserve account may be charged if that same employee takes another job and quits or is fired during the period when you are the base period employer.

The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Cal Chamber Alert Publication – Volume 34, Number 6