Renae Harg, Senior Associate and Lauren Wright, Law Graduate at MDC Legal give some insight into the problems with dismissing an employee on their probation period following a recent decision in the Federal Circuit Court of Australia.
Some employers proceed under the misapprehension that they can terminate an employee on probation without providing any reason for the dismissal, with the employee unable to pursue any legal claim against them. The recent decision of Pacheco-Hernandez v Duty Free Stores Gold Coast Pty Ltd (No. 2)  FCCA 1295 has shown this is incorrect.
What is a probation period?
A probation period is a set period of time at the beginning of an employee’s employment for an employee and employer to assess whether the employee is suited to working in the role and in the business. A probation period can vary but is usually for three to six months depending on the role and the business.
Can an employee on probation bring an unfair dismissal claim?
Under the Federal system, the Fair Work Act 2009 (Cth) provides that an employee must be employed for a minimum of six months, or 12 months if the employer is a small business with fewer than 15 employees to make an unfair dismissal claim.
An employee who is on a probation period is not likely to have worked the minimum period to qualify to make an unfair dismissal claim. Employers should keep this in mind when considering extending an employee’s probation period. If the employer extends the probation period past six months if not a small business employer or 12 months if a small business employer, the employee will likely be eligible to make an unfair dismissal claim.
In the State system, the Industrial Relations Act 1979 (WA) does not provide that an employee must be employed for a certain period of time before being eligible to make an unfair dismissal claim.
However, the Western Australian Industrial Relations Commission (WAIRC) must have regard to whether the employee was on an agreed probation period at the time of dismissal in determining whether the dismissal was harsh, oppressive or unfair.
General protections and discrimination risks when dismissing an employee on probation
Despite the fact that an employee may not be eligible to make an unfair dismissal claim in the Fair Work Commission, there is another type of dismissal-based claim, a general protections claim, which does not require the same minimum period of employment. An employee who has worked less than six months may be able to make a general protections claim alleging that the employer took adverse action against them, by terminating their employment, because of a prohibited reason. Prohibited reasons include an employee’s sex; race; age; pregnancy; exercising of a workplace right to make a complaint or inquiry; and or engaging in industrial activity.
In Pacheco-Hernandez v Duty Free Stores Gold Coast Pty Ltd (No. 2)  FCCA 1295, the employer was ordered to pay the former supervisor (who was five months into her probation period) a sum of $20,000 compensation for terminating her employment after she made a number of complaints about her employment, including that she had been bullied and was performing tasks outside her job description. In the substantive decision, Judge Manousaridis found that the employer had failed to provide a reason for termination in the meeting or termination letter, and had informed the employee that they were not required to give a reason for termination.
General protections claim have a reverse onus of proof. This meant that once the employee had made the general protections claim, the employer was required to show that they did not terminate her employment for a prohibited reason. The employer argued the employee was terminated because ‘she was not the right fit for the business’.
However, the Federal Circuit Court found that the employer had not discharged the onus and the failure to provide a reason for termination left it open for the employee to allege that the reason was prohibited or unlawful.
This case is a useful reminder of the need for employers to provide the reasons for termination, even for an employee on a probation period.
In addition to general protections claims, an employee terminated during their probation period may also be able to make a discrimination claim to the Equal Opportunity Commission or the Australia Human Rights Commission. These claims do not have a minimum period of employment as part of their eligibility criteria.
Guidance for employers
Employers should have a process for managing employees on a probation period.
As a first step, the employer should be clear when the probationary period is to end, for example by including the length of the probationary period in the employee’s employment contract.
The employer should regularly assess the employee’s performance throughout the probationary period. If the employee is not performing as expected, the employer should meet with the employee to set out any performance issues and to implement a performance improvement plan.
If the employer determines that the employee’s performance has not improved or they are not suitable to continue in the business, the employer should meet with the employee prior to the expiration of the probation period to:
- inform the employee that they have been unsuccessful in their probation period and that their employment will be ending;
- provide in clear, unequivocal terms the specific reason(s) for termination;
- inform the employee that they will be paid any outstanding salary/wages, paid any accrued but untaken annual leave, and provided with the minimum notice period or payment in lieu;
- hand the employee a letter of termination, which sets out the above details.
By seeking specialist advice from MDC Legal, you will be able to better manage and mitigate the risks associated with employees on probation periods.
Renae Harg (BA LLB, University of Western Australia) is a Senior Associate at MDC Legal. Renae has practiced in employment law since 2013. Prior to commencing with MDC Legal, Renae worked at a global law firm and boutique WA employment law firm. Renae has a broad range of experience in providing employment and workplace relations advice and has acted for individuals as well as small, medium and global employers. Renae provides advice and assistance in all employment law matters, including termination of employment, unfair dismissals, adverse action, discrimination, drafting of employment contracts and policies, enterprise bargaining, post-employment restraints and workplace investigations. You may connect with Renae by email: email@example.com or on LinkedIn
Lauren Wright (BA, JD, University of Western Australia) is a Law Graduate at MDC Legal. Lauren graduated with a Juris Doctor from the University of Western Australia in 2018 and is currently completing her Practical Legal Training. Lauren has worked in employment law since 2017, as a paralegal at the Employment Law Centre and law clerk with MDC Legal. In these roles, Lauren has drafted practical and concise advice on potential statutory and contractual-based claims, conducted legal research, drafted court documents and corresponded with both potential and existing clients. During her time at university, Lauren volunteered at the Domestic Violence Legal Clinic and Law Access. You may connect with Lauren by email: firstname.lastname@example.org or on LinkedIn
MDC Legal is a specialist employment law firm with experience in providing advice around terminations during probation periods. We provide expert solutions through high quality, cost effective legal services.