In this HR Breakfast Club webinar, BAL’s Legal Director of Employment Law & Investigations, Gabrielle Sullivan, answered questions on employee probation.

Some of the issues Gabrielle tackled included:

• Do I need a probation period in an employee’s contract?
• Can I extend the probation period?
• What’s the difference in dismissing an employee before or after the probationary period ends?

What are probation periods, and are they necessary?

A probation or ‘trial’ period is an express contractual term that commences at the start of full or part-time employment. It is generally used by both parties to assess an employee’s suitability and capacity to perform a role. A probation period is commonly three to six months, but there is no reason why it cannot be longer.

Probation has no specific provision under the Fair Work Act 2009 (Cth) or any statute. The specific duration and effect of a trial period largely depend on a contract’s terms. Generally, there are two types:

• ‘Fixed Term’ probationary periods
  • Employment expires at the end of the period, and ongoing employment is subject to a new offer being made.
• Continual engagements
  • The employee has ongoing employment from the outset and is only terminated at the end of the period if their performance is unsatisfactory.

A probation period is a common form of express notice – during the trial period, parties may terminate the contract for any (or no) reason without notice. However, other provisions may still protect employees, including against unfair dismissal.

The practical utility of a probation period is that it allows for the flexible evaluation of a prospective staff member. Both parties are made aware that continued employment is subject to the satisfactory performance of a given role. 

The legal utility of a probation period depends on the terms of the agreement and other applicable statutory imposts on termination. This includes:

• Minimum Notice of Termination Periods under s 117 of the Fair Work Act
  • One weeks’ notice or pay in lieu is required, regardless of any probation period.
• Unfair Dismissal Regime under s 387 of the Fair Work Act
  • Must be given a fair dismissal after the employee has completed the ‘qualifying period’ (6 months or 12 months for small business employers), only for employees below the high-income threshold. 
• General protections and discrimination provisions apply from the beginning of employment, regardless of any contractual probation period. 

If an employer decides to include a probationary period, it is advantageous to make it align with the relevant qualifying period. This is because it minimises confusion and maximises the amount of time during which a termination without reason will be effective. 

Dismissing an employee before and after a probationary period

Generally, an employee is protected from ‘unfair dismissal’ if employed for at least six months (or 12 months in a small business). An employer is barred from terminating a contract if it is harsh, unjust, or unreasonable to do so thereafter. Minimum notice requirements are subject to statute, as previously mentioned, and specific contractual provisions if included in the agreement. 

There are three steps to dismissing an employee during a probation period:

1) the employer must comply with the contractual term, any relevant award or firm policy.

2) 1 weeks’ notice or payment in lieu is required as per s 117 of the Act.

3) the employer cannot act perversely, irrationally or for discriminatory reasons if terminating, otherwise, they will have breached an implied duty of ‘good faith’ or relevant statutory provisions on discrimination.

It is worth noting that there is no strict legal requirement to act ‘reasonably’ (i.e., to have a justifiable reason or give forewarning of termination). Still, it is a good idea to have a paper trail to disprove allegations of perverse, irrational, or discriminatory dismissal.

Different steps apply when dismissing an employee after a probation period. General compliance with policy, contractual terms and statute is still required. If unfair dismissal applies and the employee has passed through the relevant ‘qualifying period’, the termination must be based on a valid or defensible reason related to their capacity or conduct. A fair and non-discriminatory dismissal process must be adopted, including warnings, ‘performance reviews’ and adequate notice. If unfair dismissal does not apply (i.e., they are a high-income earner or not covered by an award), employers must still comply with contractual terms regarding termination, although there is no strict need to have a valid or defensible reason for dismissal. 

Can I extend the probation period?

Yes, there are two ways to extend a probation period.

1. If the original contract provides for an extension
2. By later agreement of the parties to vary the contract to this effect.

The effect of an extension will be in accordance with the terms of the contract, however, the qualifying period and all statutory provisions related to unfair dismissal will remain the same.

To register for future HR Breakfast Club forums, visit our monthly forum page and register to attend.

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