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This Week's Tip: Introductory Periods and the At-Will Status
March 2, 2004, Volume 6, No. 9
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This Week's Tip: Introductory Periods and the At-Will Status
Some employers worry that use of a special introductory period for new
hires can limit the application of at-will employment status. You can,
however, use these periods and still safeguard the at-will relationship
with a carefully worded policy that includes appropriate disclaimers.
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| This Week's Tip:
Introductory Periods and the At-Will Status The use of an introductory period has fallen out of favor with some human resources experts as the result of a few adverse court decisions. Specifically, these courts have ruled that, in certain limited situations, an introductory period policy can have the legal effect of creating an implied employment contract that gives the employee extra job security after completion of the initial period. In response, some risk-averse employers have abandoned the whole concept of introductory periods. But for most employers, this reaction is overly conservative and unnecessarily eliminates the very real benefits of a defined "get acquainted" period. You can take advantage of this practical tool and still reduce the potential for legal risks simply by taking extra care in how you word your introductory period policy. Introductory Period History and Value The concept that the courts have questioned has evolved from the traditional probationary status placed on new hires in many union contracts. Under these provisions, the employer is allowed to terminate unsatisfactory new employees before they become eligible for the contract's job security provisions. In this setting, the transition to regular status confers extra job security that the new employee did not previously have. Over time, many nonunion employers have adopted the same probationary concept of an initial trial period, but have done so without intending to confer any extra job security at completion of the period. Most employers find that introductory periods can be very effective for training and integrating new employees into the workforce. If implemented properly, the introductory period provides an effective way either to validate the hiring decision or take quick action to remedy a mistake. During this time, the employee has the opportunity to demonstrate an ability to learn the new job and, at the same time, to determine if he likes working for the organization. Ideally, the period is also used to provide the necessary training and feedback needed to help the employee be successful. Employment-at-Will Issues A few court rulings, however, have questioned the employment-at-will status of employees who have completed a probationary or introductory period. (Under the at-will theory, employers may terminate an employee who does not have a contract for any specific fixed duration at any time or for any lawful reason, and the employee also may quit at any time.) Typically, these decisions have been handed down against employers that use vague introductory period policy language that fails to preserve the at-will relationship. For example, some courts have found that an implied contract of employment is created when an employer makes a distinction between probationary employees who can be fired at-will and other employees who have completed the period. As a result, these courts have determined that the nonprobationary employees were no longer at-will employees and could then be terminated only for cause. In these cases, the employer often specifically reserved the right to terminate the new employees during the introductory period, but then neglected to preserve the continued at-will status of employees who completed the period. For example, in Fregara v. Jet Aviation Business Jets, 764 F. Supp. 940 (D.N.J. 1991), the court found that if an employer reserves the right to fire for any reason during the probationary period, employees who complete the probationary period have earned the protection of a just- cause termination requirement. Similarly, in Witkowski v. Thomas J. Lipton, Inc., 643 A.2d 546 (N.J. 1994), the court determined that an employee who completed a three-month introductory period could reasonably believe he would be discharged only for just cause. Similarly, some policies that refer to "trial" periods, or that reclassify a new employee as "permanent" after the completion of the period, have been judged to give the employee greater job rights. Even the use of the term "probationary" to describe the period, with its traditional union contract and job security implications, can undercut the employer's right to terminate employees at will. |
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However, many other courts have determined that an employer generally will * not * create a restrictive contract if its policy includes a clear statement that confirms the employee's at-will status throughout all stages of employment, and if other policies also clearly explain and enforce the at-will relationship. So, for example in Helland v. Kurtis A. Froedtert Mem. Lutheran Hosp., 601 N.W.2d 318 (Wis. Ct. App. 1999), the court rejected a nurse's argument that her employment changed from at will during the probationary period to one of a contractual nature after probation was completed. She had signed an acknowledgment form stating that the handbook was merely a summarized "working guide," and the notice on the back cover of the handbook stated it was not intended to create contractual rights. In addition, the handbook stated that all employees were employed at will, and its rules of conduct included language reserving the employer's right to take any action, up to termination. Prevent Legal Problems with Proper Drafting So, how can you make sure that your introductory period policy preserves the at-will status? Here are three tips: 1. Label the policy carefully. Do not use the traditional phrase "probationary period" with its union security clause connotations. Instead, use a term like "introductory period" which conveys that the new employee is being introduced to the organization and that both parties have the opportunity to evaluate each other. Some employers refer to this time period as a training period, orientation period, initial employment period, or even a "familiarization" period. 2. Include a clear at-will statement in the policy. Whatever you choose to call this period, the policy should include a clear disclaimer that establishes the employer is not creating an employment contract and reaffirms the at-will status of all employees. An example of an effective statement is: "At all times, including after successful completion of the introductory period, employment with the Company is considered to be at-will, and the employment relationship may be terminated at any time for any lawful reason by either party." 3. Make sure other policies also include appropriate at-will disclaimers. It is not enough just to include the at-will statement as part of the introductory period policy. You also should have a completely separate at-will policy and then discuss the at-will relationship in other policies, such as those addressing hiring, termination, discipline, performance evaluation, and complaint resolution. Use the Policy Effectively Employers are right to be cautious about using introductory periods since, if not properly handled, they can limit your ability to terminate at will. However, these concerns should not deter you from using what can be a significant evaluation and decision-making tool. Just make sure your policies are correctly worded to preserve the at-will status. Of course, simply having the policy will not guarantee success for your new employees. You have to implement the policy effectively to reap its benefits. In particular, managers must be willing to spend the necessary time with new employees both to train them and evaluate their abilities. By giving the introductory process a special status and emphasis, you have the best chance of getting the new employee up-to-speed quickly or of making an early decision to cut your losses. Subscribers to the Personnel Policy Manual and HR Policy Answers on CD can find a sample introductory period policy in Introductory Period, Chapter 204, and court cases discussing at-will employment and introductory period policies in Introductory Period, Chapter 204, note 9. If you do not subscribe to the Personnel Policy Manual or CD service, and you'd like to use it free for 30 days to see if you like it, go to: http://www.ppspublishers.com/service2.htm Or just give us a call toll-free at 1-800-437-3735. |
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