Your probation period: a lawsuit waiting to happen

Issue: Should you set a probation period for new employees?

Risk: It can jeopardize your employment-at-will rights by implying that once the period ends, employees become “permanent.”

Action: Dump your probation period or, at the very least, rename it.

If your employee handbook or job-offer letters say new hires will face a probation period of, say 60 or 90 days, you should consider dropping that policy. If your top brass won’t go for that, take steps to ensure that your probation period won’t lock you into an unexpected employment contract.

What’s the potential problem? By setting up a probation period, you could be implying that once the period is over, the employee becomes “permanent” or earns some new level of job security. This misunderstanding could eliminate the employee’s at-will employment status and bind you to firing the employee only for “cause.”

Your goal: Make it clear that you can fire any employee at any time and for any reason. Include a disclaimer in your handbooks, job applications and offer letters stating that workers are employed at-will unless they hold a written agreement signed by the company president.

If you must set a probation period, make sure it says employees will remain employed at-will both during and after the probation period. And refer to it as an “introductory” or “training” period: words that are less likely to imply a contract.

Recent case: An employee signed a job-offer letter that included an at-will section, which said he could be fired “at any time.” The letter also called for a 90-day probation period. The company fired him after two years without giving a reason.

He sued for breach of contract, claiming he could be fired only for cause. He won. Reason: The job-offer letter said he could be fired “at any time,” but not necessarily “for any reason.” Also, the court said the probation period hinted that he could be fired only for good cause. (Dore v. Arnold Worldwide Inc., Cal. Ct. App., 2004)