New employees are often subject to a probationary period; that time between being hired until they are a “full-fledged” company employee complete with all the benefits. Some companies do this to see if their new employees are a good fit, but this practice could be outdated, even fraught with legal implications.

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.

Using Probation Periods as a Company

An employer may use probationary periods for a number of employment situations. According to Workplace Fairness, an employee may be considered probationary if:

  • The worker is first hired, is under a union contract or the company’s personnel policies
  • The worker is being disciplined for performance
  • The worker is under review for a new position
  • The worker is being promoted to a managerial or supervisory position

Company benefits are typically limited for new employees during probationary periods. Employers might wait to extend retirement benefits and PTO for 90 days. Yet every employee, no matter if it is the first or last day of employment, is still covered by the Fair Labor Standards Act including minimum wage, discrimination and worker’s compensation laws.

Probationary periods might be used for current employees to evaluate their performance. For example, if you have a sales employee who continually fails to meet a sales goal, he or she might require a probationary period where a manager coaches them on how to improve sales techniques. Or a construction worker might go on a probationary period for safety violations where he or she must review procedures and re-take safety courses.

Legal and Compliance Risks

In theory, 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 have an opportunity not 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.

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.

What is “At-Will” Employment?

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. The U.S. is one of a handful of countries where employment is predominantly at-will. Most countries throughout the world allow employers to dismiss employees only for cause.

According to the National Conference of State Legislatures, the U.S. has at-will employment to respect the freedom of employee contract, employer deference, and the belief that both employers and employees favor an at-will employment relationship over job security. At-will also means an employer can change the terms of the employment relationship with no notice or consequence. An employer can alter wages, terminate benefits or reduce PTO. With at-will in place, probationary periods may seem outdated and even useful.

Tips for Creating Compliant and Successful Policies

If your company deems a probationary period is necessary, it’s important to make sure your policies are compliant.

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 they 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.

Provide assistance

Provide employees with a mentor or coaching to improve performance. Use a learning management system to offer and track training completions and certifications for compliance. An LMS can be used with employee onboarding, professional development and any required compliance reporting.

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 and Learning Management solutions give 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 of the information is automatically saved in our cloud-based software.

The Learning Management module gives employees 24/7 access to a library of courses, including OSHA-approved courses along with courses on diversity and inclusion, safety, leadership, ethics and more to help maintain training compliance while closing the skills gap at your organization.

Contact us to schedule a demo to see these modules in action.