Probationary periods in peril

It is often assumed that an employer need not have or give any reason for terminating an employee’s employment during a probationary period.

However, a recent High Court decision against Qantas highlights the importance of employers exercising caution when making decisions that may have the effect of depriving employees of their ability to exercise future rights in relation to their employment.

A common situation where employers may be at risk is in terminating an employee’s employment during a probationary period, which has the consequence of preventing the employee from accruing the necessary period of service to qualify for statutory or contractual protections against termination of employment (such as protection against unfair dismissal).

In late 2020 during the COVID-19 pandemic, Qantas decided to outsource its ground handling operations at ten airports to third-parties (the Outsourcing Decision). Thousands of Qantas employees were made redundant, many of whom were members of the Transport Workers Union (TWU).

When the Outsourcing Decision was made, affected Qantas employees did not have any right to engage in protected industrial action or enterprise bargaining under the Fair Work Act 2009 (Cth) (FW Act), either because at that time the enterprise agreement that applied to their employment had not yet passed its nominal expiry date, or because the procedural steps for protected industrial action mandated by the FW Act had not yet been followed.

It was anticipated (by both Qantas and the TWU) that those rights would exist in 2021 and that affected employees would elect to exercise those rights at that time.

The TWU challenged the Outsourcing Decision on behalf of affected employees, arguing that Qantas made the decision in order to prevent affected employees from exercising their future right to engage in protected industrial action, and in doing so Qantas had engaged in unlawful adverse action.

The High Court confirmed that it is unlawful for an employer to take adverse action to prevent an employee from exercising a ‘workplace right’ – even if that right is not in existence or held when the adverse action is taken, and even if the employee’s capacity or eligibility to exercise that right is contingent upon some future event. It is enough if the employer takes action in order to deny an employee the ability or opportunity to exercise a workplace right in the future. The employee need not have proposed to exercise the right.

Most businesses prudently choose to include a probationary period in their employment contracts as a tool to assess the suitability of a newly hired employee.

The implication of the High Court decision is that, in exercising the right to terminate employment during a probationary period, employers must beware of claims that they are doing so to prevent the employee from becoming entitled to future workplace rights or protections.

This risk may be especially acute where the length of the probationary period is similar to or the same as the minimum employment period for an employee to qualify for unfair dismissal protection (six months for businesses which are not small business employers under the FW Act) and the decision to terminate is made close to the end of the probationary period.

Dismissed employees might choose to pursue adverse action claims, arguing that the decision to terminate their employment was made so as to prevent them from exercising their future right to bring an unfair dismissal claim. Employers would then bear the onus of proving that the substantial and operative reason for termination was not to deprive the employee an opportunity to pursue an unfair dismissal claim.

The timing of the decision to terminate, and having an objectively supportable reason for dismissal, will be important to the employer’s ability to resist a claim.

One way to mitigate this risk is to shorten the length of the probationary period in employees’ contracts (for example, to three months). Doing so will make it easier for employers to show that the decision to terminate was unrelated to the employee’s eligibility to bring an unfair dismissal claim. Of course that will mean that the employer will need to pro-actively manage and assess suitability of the employee during that shorter period.

It is also important for employers to have a documented assessment process in relation to the employee’s suitability for the role to support the reasons for the decision to terminate during the probationary period.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.

Co-author

Name: Lachlan Chuong

Position: Associate

Practice: Disputes

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