Could the end of probationary periods be near?

A recent Federal Court judgment has raised interest around probationary periods, as an employee who was dismissed just seven hours before his probation had concluded established a prima facie case against his former employer.

Question marks around probationary periods are beginning to arise after a recent Fed­eral Court judg­ment of Jus­tice John Nicholas resulted in a reinstatement.

Michael Byrnes, employment law partner from the Sydney-based firm Swaab, reviewed the case and the effect it could have on dismissals occurring close to the conclusion of the probationary period moving forward.

“The employ­er in the case did what many employ­ers have done – ter­mi­nat­ed employ­ment just before the employ­ee would have had the right to bring unfair dis­missal pro­ceed­ings, usu­al­ly at the end of a con­trac­tu­al pro­ba­tion­ary peri­od.

“In this case, the employ­ee was seven hours short of serv­ing the min­i­mum employ­ment peri­od of 12 months required as the employ­ee of a small-busi­ness employ­er to bring such a claim. (For employ­ees of non-small busi­ness employ­ers, the applic­a­ble min­i­mum employ­ment peri­od is six months).

“The employ­ee sought inter­locu­to­ry orders pur­suant to the Fair Work Act 2009 (Cth) (FW Act) that he be rein­stat­ed, cit­ing breach­es of the gen­er­al pro­tec­tions provisions,” said Byrnes.

Byrnes explained that Justice Nicholas, who oversaw the case, established that the employee was pursuing a prima facie (on face value) case, claiming that the timing of his dismissal was motivated by the fact that his probationary period was nearly concluded; therefore, the employer could avoid an unfair dismissal case from arising.

“Jus­tice Nicholas held that the employ­ee estab­lished a pri­ma facie case that the tim­ing of his dis­missal had been influ­enced by a desire on the part of the employ­er to ensure he could not make a claim for unfair dis­missal and that this was also a sub­stan­tial and oper­a­tive rea­son for his dismissal.

“His Hon­our made an inter­im order for the rein­state­ment of the employ­ee and an order the employ­er be restrained from ter­mi­nat­ing his employ­ment (with­out the leave of the court),” said Byrnes.

In the conclusion of the judgment, Justice Nicholas said: “It may be assumed for present pur­pos­es that [the employer’s] inves­ti­ga­tion and find­ings pro­vid­ed AFIC with rea­son­able grounds for sum­mar­i­ly ter­mi­nat­ing [the employee’s] employ­ment and that her con­clu­sion that the var­i­ous alle­ga­tions made against him were sub­stan­ti­at­ed was the prin­ci­pal rea­son for the dis­missal.

“How­ev­er, in my view, [the employee] has estab­lished a pri­ma facie case that the tim­ing of his dis­missal was influ­enced by a desire to ensure that he could not make a claim for unfair dis­missal and that this was also a sub­stan­tial and oper­a­tive rea­son for his dis­missal on 3 Sep­tem­ber 2024. I am, there­fore, per­suad­ed that he has estab­lished a pri­ma facie case for relief in respect of AFIC’s con­tra­ven­tion of s 340(1) of the FW Act.”

Byrnes explained that a recent High Court authority in a Qantas case played a significant role in the case and in the decision of Justice Nicholas to reinstate the employee.

“The recent sem­i­nal High Court author­i­ty in Qan­tas Air­ways Lim­it­ed v Trans­port Work­ers Union of Aus­tralia (2023) had a sig­nif­i­cant role to play, as the rel­e­vant work­place right, which was the right to bring an unfair dis­missal claim, had not yet crys­tallised (as the min­i­mum peri­od had not been served),” said Brynes.

Byrnes went on to explain the flow-on effect that decisions like this could have on probationary periods. He believes that the case has given rise “to some inter­est­ing con­sid­er­a­tions in the inter­ac­tion between the gen­er­al pro­tec­tions and unfair dis­missal pro­ceed­ings of the FW Act”.

He did note, however, that this was an inter­locu­to­ry deci­sion with the case yet to be finalised before the courts.

“While cau­tion needs to be tak­en in extrap­o­lat­ing broad­er con­se­quences from one deci­sion (par­tic­u­lar­ly an inter­locu­to­ry deci­sion), the notion that the gen­er­al pro­tec­tions pro­vi­sions of the FW Act might be breached by dis­miss­ing an employ­ee just before the min­i­mum employ­ment peri­od (whether it be six or 12 months) ends would come as a dis­con­cert­ing sur­prise to many employ­ers,” said Byrnes.

“Dis­missal com­mon­ly occurs at the expi­ra­tion of con­trac­tu­al pro­ba­tion­ary peri­ods which often coin­cide with the min­i­mum peri­od of employ­ment under the FW Act.”

On this basis, Byrnes said that it is “inevitable” that some employees will no doubt rely on the Qantas decision – which was heavily involved in this decision – to argue that their termination before the probationary period concludes is, in fact, a breach of general protections.

“It is inevitable some employ­ees will seek to rely upon the Qan­tas deci­sion as applied in this case to argue that a ter­mi­na­tion of employ­ment made just before the six (or 12 month) ser­vice peri­od in employ­ment (i.e. when the employ­ee can bring unfair dis­missal pro­ceed­ings) is a breach of the gen­er­al pro­tec­tions pro­vi­sions of the FW Act,” said Byrnes.

“The min­i­mum peri­od of employ­ment in the FW Act for an employ­ee to be able to bring unfair dis­missal pro­ceed­ings must have work to do. Will a ter­mi­na­tion the day before eli­gi­bil­i­ty invite sus­pi­cion? A week before? Where is the tem­po­ral line drawn?

“On a super­fi­cial lev­el, it seems para­dox­i­cal for the gen­er­al pro­tec­tions pro­vi­sions of the FW Act to seem­ing­ly under­mine the oper­a­tion of the min­i­mum peri­od require­ment. This is par­tic­u­lar­ly so giv­en the immutabil­i­ty of the min­i­mum peri­od – it can­not be removed or var­ied in an award or enter­prise agree­ment or con­tract­ed out of or var­ied by contract.”

This invited suspicion that Byrnes alludes to makes the satisfactory performance and conduct aspect of dismissals crucial in these cases moving forward.

“Of course, ter­mi­na­tion dur­ing min­i­mum employ­ment peri­od has nev­er been a free-for-all; employ­ees have always been able to bring gen­er­al pro­tec­tions claims if dis­missed for a pro­hib­it­ed rea­son, irre­spec­tive of peri­od of ser­vice. This case, emerg­ing after the Qantas deci­sion in rela­tion to future work­place rights, is mere­ly anoth­er exam­ple of this,” said Byrnes.

“It is for this rea­son that a con­trac­tu­al pro­ba­tion­ary peri­od, which states that ongo­ing employ­ment will be sub­ject to sat­is­fac­to­ry per­for­mance and con­duct of the employ­ee dur­ing that peri­od, may now have a more impor­tant role to play.”

Overall, Byrnes strongly believes that future cases in this space should be looked upon with great interest as the area of probationary periods pertaining to employees and unfair dismissals is becoming increasingly blurred after decisions like this case and the Qantas example.

“A ter­mi­na­tion of employ­ment that occurs near the end of such a pro­ba­tion­ary peri­od can be argued to have been exe­cut­ed pur­suant to this process agreed at the com­mence­ment of employ­ment, rather than to pre­vent the employ­ee bring­ing unfair dis­missal pro­ceed­ings (even thought it would have this effect).

“Fur­ther to this, there is a strength­en­ing of the argu­ment that a rea­son for a deci­sion to ter­mi­nate employ­ment dur­ing a pro­ba­tion­ary peri­od should be giv­en, specif­i­cal­ly whether dis­missal was for per­for­mance or con­duct rea­sons (or both). This offers fur­ther pro­tec­tion against a find­ing a dis­missal was moti­vat­ed by any pro­hib­it­ed rea­son (includ­ing, but not lim­it­ed to, denial of an oppor­tu­ni­ty to bring unfair dis­missal proceedings),” said Byrnes.

“Any final judg­ment in this deci­sion, as well as any oth­er cas­es advanc­ing the same argu­ment, will be worth keep­ing an eye on.”