Background
Employers often designate the first few weeks or months of a new recruit's employment as a probationary period, during which time the employee’s performance is closely assessed, to ensure it meets the required standard. It also allows the employer to identify any required training and support.
During the probationary period, employers often exclude certain contractual benefits, such as membership of a pension scheme, or, as in this case, contractual notice which is more generous than that prescribed by statute as a minimum.
Facts
Miss Przybylska started work for Modus Telecom Ltd (Modus) on 3 October 2005. Her employment contract was subject to a probationary period of three months, during which either party could terminate the contract by giving written notice of one week. Following successful completion of the probationary period, the company was required to provide P with three months’ written notice.
P’s contract of employment stated that ‘the company reserves the right to extend your initial 3 month probationary period and one-week notice period where circumstances may not have allowed an objective assessment of your performance to be made.’
P’s three-month probationary period was therefore due to expire on 2 January 2006, a day when she was off work (New Year bank holiday). Modus did not expressly exercise the right contained in the contract to extend the probationary period beyond its expiry on 2 January 2006.
On 31 January 2006, P was told her that her employment was to be terminated because she had not successfully completed her probationary period. She was sent a letter which said that her employment was being terminated because it was unsatisfactory in four different respects. She was paid one week's pay in lieu of notice.
P brought a claim in the employment tribunal for breach of contract. Because her three-month probationary period had not been extended and had therefore expired, she argued that she was entitled to three months', not just one week’s, notice.
Employment tribunal rejects P’s claim
The tribunal rejected P’s claim. It implied a term to give ‘business efficacy’ to the employment contract, namely that the probationary period would be extended for a reasonable time to allow the employer to provide some indication to the employee as to whether it had been successfully completed.
EAT reaches different conclusion
P appealed to the EAT. She argued that implying such a term into the employment contract was unnecessary, given that there was already an express term in the employment contract allowing Modus to extend the probationary period if it was not able to make an assessment of P’s performance before the end of the original three-month period. Implying such a term would give Modus a further and additional right in effect to extend that period. Furthermore, the term implied by the tribunal contradicted the express term contained in the contract of employment.
The EAT upheld P’s claim. The tribunal had erred in law in implying such a term into P’s employment contract. The implied term was inconsistent with the express term in her contract because it gave to Modus a second or additional right in effect to extend the probationary period or the period during which P was entitled only to one week's notice. There was no basis upon which such an implied term could be said to be necessary. Modus must have known that P was going to be away on holiday, or at the very least, not or unlikely to be working over Christmas and the New Year period. If Modus was unable, prior to 2 January 2006, to complete its assessment of P’s performance, the contract of employment conferred on the company the right to extend it, but it had failed to do so. The express term was sufficient to ensure the business efficacy of the contract. No further right was necessary.
The EAT remitted the matter to the employment tribunal for the same Chairman to assess compensation for breach of contract in failing to give P the three months' notice of termination to which she was entitled.
Comment
This judgment highlights the importance of employers diarising when probationary periods are due to expire, and actively managing those periods.
Care also needs to be given to the way in which clauses dealing with probationary periods are drafted. For example, in this case, the outcome may have been avoided had the employer included a clause to the effect that the probationary period would automatically continue until the employer confirmed in writing that the probationary period had been successfully completed.
As it was, the EAT was sympathetic to P’s situation. The employment contract expressly allowed the employer to extend the probationary period, but it had failed to do so. It stated that ‘a reasonable bystander in P’s shoes might have felt that, unless the period was extended pursuant to the contract, once the 3 month probationary period had come to an end, she was regarded as having successfully completed that period."
Employers often exclude certain contractual benefits during the probationary period. The facts of this case illustrate that if it is necessary to terminate a relatively new recruit because of poor performance, depending on the terms of the contract, it may be much less expensive to terminate during, rather than just outside, the probationary period – here the mistake could cost the company up to 11 weeks’ extra pay.
As a final cautionary note, employers should of course also consider any other claims aside from breach of contract that the employee might have upon termination. For example, where a probationary period is particularly long, or where it has been extended several times, it is important to check whether the employee might also qualify for the right to claim unfair dismissal (subject to some exceptions, the employee must normally have one year’s continuous service to bring such a claim).