Probationary periods can be a useful tool to evaluate employees—both new and existing—but they can also be risky. This post addresses potential risks for employers when they use probationary periods, including when a probationary period inadvertently implies that an employment relationship is no longer at-will.
A probationary period is a length of time when a new or existing employee receives training, is under evaluation, or is subject to extra supervision either to learn the job or improve their performance. The lengths of such periods vary—for example, employers may use 30- or 90-day periods as a matter of course—but they should be crafted to provide a sufficient period for an employer to evaluate the employee's response to training.
For a new employee, the probationary period is akin to a trial period. The probationary period allows employers to evaluate the new employee's fitness for the job while investing less resources than they would with an employee who is not in a probationary period. Specifically, during the probationary period, the employer may elect to delay or alter the normal employment rules for the new employee while the new employee is learning how to perform the job. For example, the employer may delay the new employee's eligibility for certain benefits during the probationary period.
For struggling employees, probationary periods are often used as part of a performance improvement plan. In such cases, the probationary period puts the employee on notice that their job is at risk if their performance does not improve. When employers place an employee on a probationary period before termination, those reviewing a termination more readily consider the termination fair and not discriminatory on the part of the employer. Since a possibility for the correction of an employee's subpar performance is provided, the probationary period allows the company to retain a valuable employee and avoid the costs of hiring and training a new employee.
It is important to ensure that any probationary periods do not conflict with the employee's "at-will" employment status. As mentioned in recent posts in this employment law series, Ohio, like most states, is an employment-at-will state. This means that the employer can terminate the employee at any time and for any reason (including no reason at all), subject to a few exceptions. (See posts by my colleagues Clayton Prickett and Jason Palmer discussing some exceptions to the at-will doctrine.) However, an employer can lose this right to discharge at-will if the employer makes a promise or creates an expectation of continued employment that is inconsistent with at-will employment.
While there is a strong presumption of at-will employment in Ohio, offering employees a probationary period can inadvertently imply that the employee is no longer at risk of termination based upon their performance after the probationary period is over. Specifically, the completion of a probationary period could be interpreted to mean that the employer can no longer let the employee go absent cause. Indeed, some courts have held that the mere completion of an initial evaluation period implies contract obligations that make it more difficult for companies to discharge at will and must instead be with cause. These implied contractual obligations can lead to increased risk of wrongful termination lawsuits if the employer terminates the employee. Therefore, the employer should maintain statements in information provided to employees, such as in new-hire paperwork and employment handbooks, stating that the employee will at all times be an "at will" employee.
Additionally, requiring a probationary period may reflect adversely on the employer's reputation among potential talent. A prospective applicant may see that an employer has a probationary period for employees and assume that the company is not confident with its hiring choices, therefore making the prospective applicant less likely to trust the employer. Prospective applicants might also associate a required probationary period with low job security, potentially scaring away qualified applicants.
Before electing to use probationary periods, employers should consider whether a probationary period is right for the needs of the employer and its workforce.
If an employer chooses to use a probationary period with a new hire or existing employee, the employer should remember to be C-L-E-A-R:
Counsel. Employers should consider consulting with legal counsel to ensure that their probationary period policies are drafted and implemented properly.
Length. When placing an employee under a probationary period, the employer should make sure that the probationary period policies and procedures clearly define how long the probationary period will last. The employer should also make clear that the probationary period can be extended at the employer's sole discretion.
Employment at-will. Employers that choose to use a probationary period should make it clear that successful completion of the probationary period does not change the employment at-will relationship. In fact, for a new employee, the handbook description of a probationary period should not focus on discipline. Instead, it should be described as an initial period during which the employer and the employee can decide if the job is a good fit for both of them. The policy should also make clear that "at-will" status is in effect even during the probationary period.
Apply them consistently. Probationary period policies should apply uniformly to all employees in similar circumstances.
Review. Performance reviews allow managers to monitor progress and provide guidance to employees. Reviews also document performance so employers have a record of when goals have not been met, requiring the probationary period. This documentation helps keep employers safe from litigation if an employee is terminated due to their performance.
Employers should think critically about the benefit of having probationary periods. If an employer determines that having a probationary period is in their organization's best interest, the employer should consider working with legal counsel to develop and implement such policies.
Up next in this series: Combatting the Risks of Departing Employees, we discuss whether employers should use progressive discipline or immediate termination decisions. Stay tuned.