Are Probationary Periods Legal? - Arcoro

Probationary periods were commonplace in the US when much of the workforce was unionized. According to SHRM, getting through a 90-day probationary or trial period meant a worker was covered by union contract protections. Today, only 6.4% of private-sector workers are covered by a union’s collective bargaining agreement. But some companies still find it useful to use a probationary period, especially when promoting or transferring an existing employee to a new position.  

What is a Probationary Period? 

A probationary period is a length of time when a new employee or an existing employee is under evaluation, receives training or extra supervision either to learn the job or improve their performance. A probationary period can be a month, two months, 90-days or even a year. The probationary period is a way for employers to cement the employment relationship, ensuring the employee will be high performing in the position. This introductory period gives an employer a window to either sever the employee relation or reevaluate and offer more guidance. 

Legalities Surrounding Probationary Periods 

Probationary periods seem like a good idea. If a new employee isn’t working out, you have a window to fire them or, if a current employee can’t handle new responsibilities, you don’t have to promote them. So why would offering a probationary period be a bad thing? Because employment is considered “at-will” in every state except Montana. If you’re offering employees a probationary period, it could be implied that once the evaluation period is over, they can’t be terminated. 

“At-will” means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without incurring legal liability. In turn, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences. Because employment is already “at-will,” having a probationary period is not only redundant but implementing such a period could limit a company’s options. According to SHRM, some courts have ruled that the mere completion of an initial evaluation period implies contract obligations that make it more difficult for companies to discharge at will and must instead be with cause. It could be argued that all employees are subject to the same standards of employment and conduct, thus no probationary period is necessary. 

 To get around this, SHRM says some companies will use terms like introductory, evaluation, training, initiation, eligibility or orientation. While these terms may be different from probation, they’re still similar enough that an employee might still believe once the period is over, they have employment security. 

When are Probationary Periods Useful? 

Probationary periods can give both employers and employees wiggle room to figure out if the working relationship will work out in the long term. Setting up a probationary period gives both parties a shared understanding of what’s expected.  

Company culture is an important part of the job, so much so that one in five employees have left a job due to workplace culture or lack thereof. Having a probationary period gives both parties the ability to see if the company’s culture is a good fit, potentially saving money in the long run by reducing the costs associated with turnover in terms of wages, development and benefits. 

A probationary period also allows you to evaluate just how much training a new employee will take to work effectively. This could be a game changer for industries like construction, which is scrambling to fill positions to keep up with increased demand. If a construction company knows a new hire needs a fair amount of training, a probationary period allows them to evaluate the process as it’s happening. If the new hire isn’t progressing fast enough, there could be safety implications if that hire isn’t ready to be onsite.  

Best Practices for Probationary Periods 

• Set clear policy expectations. Define the length of time the probationary period exists. For new employees, that could be 90 days. For current employees, it could be six months. Let your employees know what milestones need to be reached for the probationary period to be over. 

• Make sure probationary periods exist for a reason. Probationary periods must exist for a reason, like a benefit that’s achieved once the period is completed. There must be a difference in those employees’ status during the period and after. Usually, workers will receive PTO or 401(k) benefits once the period ends. 
• Use clear, upfront language. The probationary period policy should specifically state employment is at-will and completing the probationary period does not guarantee job security. Include upfront language about the definition of at-will employment and that any employer/employee relationship can be terminated without cause or notice. SHRM notes to be as clear as possible when writing the policy so it can’t be interpreted against you in court. 
• Tie probationary periods to performance. Performance reviews are a formal assessment conducted by managers to monitor employee progress towards mutually agreed-upon goals, discuss strengths and identify areas of improvement. Regular performance reviews allow managers to monitor progress and provide assistance to employees. They also document performance so you have a record of when goals haven’t been met, requiring the probationary period. This documentation helps keeps employers safe from litigation if an employee is terminated due to his or her performance. 

Arcoro provides HR modules to help companies grow their employee base. Performance Management gives managers the ability to set, track and approve employee goals and the training needed to improve skills. The Performance Management module gives managers one-click access to all goals, tasks, evaluation forms, employee competencies and more. Administrators can configure employee review forms with rating scales, weighted sections and custom content. And, all the information is automatically saved in our cloud-based software. 

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