In this edition of The Latest Chapter, we discuss termination during the probationary period and the recent decision by the Ontario Superior Court of Justice in the on-going class action initiated by major junior ice hockey players in the Ontario Hockey League seeking a ruling that they are employees and not students.
Nagribianko v. Select Wine Merchants Ltd: What are the implications of being dismissed during the probationary period?
The “probationary period” is one of the most misunderstood concepts in employment in Ontario. Although not defined in the Employment Standards Act, 2000 (the “ESA”), it is commonly understood to refer to a “trial period” during which the employee can be let go without any obligation on the part of the employer. Many assume that every employee has a probation period. And many are surprised to learn that:
- unless an employment contract clearly and explicitly specifies that one’s employment includes a probationary period, it does not;
- if an employer wants to impose a probation period, they must clearly set out the terms;
- the probationary period can be longer than three months, however, regardless of its agreed upon length, employers who terminate an employee after three months must give notice of termination or pay in lieu of notice; and
- employers must provide a reasonable opportunity for employees to demonstrate their suitability for employment and make decisions on suitability in good faith.
In a recent decision from the Court of Appeal for Ontario, the appellant employee, whose employment was subject to a written employment contract including a six-month probationary period, was dismissed after four months. The employment contract included the following language regarding probation: “Probation . . . . . . Six months.”
At trial, the Deputy Judge found the meaning of the term “probation” to be unclear on its face and accepted the employee’s subjective understanding of the probationary period, which was that if he performed well, his employment would continue after it ended. The Deputy Judge awarded common law reasonable notice damages of four months.
On appeal, the Divisional Court overturned this ruling because the Deputy Judge:
- failed to realize that employment of a probationary employee is different in nature from that of a non-probationary employee;
- the standard for dismissal during probation is suitability whereas the standard for non-probationary employees is just cause;
- in interpreting the contract, should have determined what a reasonable person in the same circumstances would have understood the contract to mean – the subjective intentions of the parties are irrelevant; and
- failed to account for the fact that the employment contract’s reference to a probationary period of six months was clear.
The Divisional Court classified the nature of the employment relationship during the probationary period as “tentative” and explained:
- where the employment of a probationary employee has been terminated for unsuitability, the employer’s judgment and discretion in the matter cannot be questioned; and
- in the absence of bad faith, an employer is entitled to dismiss a probationary employee without notice and without giving reasons.
That was not the end of the story, however. In a brief decision, the Court of Appeal for Ontario upheld the Divisional Court’s decision and clarified:
The status of a probationary employee has acquired a clear meaning at common law. Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the probationary employee was given a fair and reasonable opportunity to demonstrate their suitability.
The Court of Appeal for Ontario did not provide clarification on the suitability threshold or guidelines regarding making a good faith determination. As a result, employees dismissed during or following the probationary period will find it extremely difficult to challenge the basis of their dismissal, unless they can direct the judge to evidence of bad faith.
However, one recent case from the British Columbia Supreme Court, in finding that an employer did not exercise good faith, considered whether:
- the probationary employee was made aware of the basis for the employer’s assessment of suitability before or at the commencement of employment;
- the employer acted fairly and with reasonable diligence in assessing suitability; and
- the employer’s decision was based on an honest, fair and reasonable assessment of the employee’s suitability.
This British Columbia case may assist employees in Ontario who are dismissed without reasons or assessment during their probationary period, but given the Nagribanko decision, the threshold for employers to dismiss probationary employees in Ontario is arguably lower than in British Columbia.
Berg v. Canadian Hockey League: Are the players Employees or Students?
In the US, NCAA student-athletes have been repeatedly denied in their attempts to certify a class-action alleging that they are in fact unpaid employees or interns who deserve to be paid.
While this debate may be all but over in the US, it is just heating up in Canada.
In 2014, a $180 million class-action lawsuit was commenced in Ontario on behalf of the players in the various major junior hockey leagues across Canada. The lawsuit claims compensation for allegedly underpaid players, arguing that they receive less than the minimum wage and that the players should collect holiday, overtime and vacation pay.
In April 2017, Perell, J. of the Ontario Superior Court of Justice certified the class of players, including players who are members of a team owned and/or operated by one or more of the clubs located in the Province of Ontario or were at some point commencing October 17, 2012 and thereafter (the American teams, of which there are two in the Ontario Hockey League, were excluded).
The key issue in the case is whether the players are employees. Mr. Berg, one of the representative plaintiffs, pled that in 2013, he signed a “Standard Player Agreement” (“SPA”), which provided that in exchange for providing his services, he would receive a fee of $50/week for three seasons commencing August 31, 2013. He explained that in September and October 2013, he devoted about six hours a day, seven days a week to providing services. When the team travelled, he would devote longer hours, up to twelve hours a day. He received $50.00/week by cheque. He did not receive the minimum hourly wage rate governed by the ESA, nor vacation pay, holiday pay, or overtime pay.
He pled that he was an employee because of the control the team exerted over him, namely:
- he was subject to the control of the team as to when, where, and how he played hockey;
- he was required to adhere to the team’s schedule of practices and games;
- the team provided tools, supplied room and board, and a benefit package;
- he was not in business on his own account; and
- the team’s business is profit, which depends entirely on the services of its players.
The Defendant hockey organizations deny that they have an employment relationship and portray themselves as benefactors of their players with the mission of putting the players first. They assert that they:
- provide a multi-faceted development program focusing on hockey training, education, and character development in a safe, caring and healthy environment; and
- provide the support necessary for the player to maintain the educational opportunities of his choosing with career opportunities inside and outside of hockey.
While this certification decision by Perell, J was not a hearing on the merits, both sides showed their hands with regard to the arguments to be expected at trial and it is safe to say that the gloves are definitely off.
By David Master