Probationary Periods: FAQs & Common Misconceptions

Employers sometimes use "probationary periods" when hiring new employees or promoting employees into a new position. The probationary period is used as a time to assess whether the new hire or newly promoted employee is a good fit for the position. Typically, probationary periods range from three to six months.

The following are frequently asked questions about probationary periods, including some that address common misconceptions.

Q: Are probationary periods a good idea?

A: Probationary periods can lead to confusion regarding whether the employment relationship is "at-will."

At-will employment generally means that, absent certain exceptions such as an implied contract or public policy, either the employer or the employee can terminate the employment relationship at any time and for any reason, as long as the reason is a lawful one. Absent an at-will-employment relationship, the employer may have to establish "just cause" to terminate an employee. At-will employment is recognized in every state but Montana.

When employers use probationary periods, employees sometimes think that once they successfully complete a probationary period, they are no longer at risk for termination based upon their performance. This misunderstanding can lead to an increased risk of wrongful termination lawsuits if the employer terminates the employee. Accordingly, with the exception of collective bargaining agreements or circumstances where the employer wishes to enter into a contract with a particular employee, probationary periods are generally not considered a best practice in most states.

Additionally, the term "probationary period" may have a negative connotation for new employees. New hires may misinterpret "probationary" to mean that they are immediately placed on a disciplinary action plan at the start of their employment. This could negatively impact the employee’s perception of the company.

Q: How is Montana different?

A: In Montana, employers must have "good cause" to discharge an employee after the employee completes an initial probationary period. If an employer doesn't establish a specific probationary period or provides that there is no probationary period prior to or at the time of hire, the probationary period is assumed to be 12 months from the date of hire, which can be extended up to an additional six months by the employer. The law also has rules for notifying a discharged employee of any written internal procedures under which an employee may file an appeal with the employer about a discharge.

The state defines good cause as reasonable job-related grounds for an employee's dismissal based on:

• The employee's failure to satisfactorily perform job duties;
• The employee's disruption of the employer's operation;
• The employee's material or repeated violation of an express provision of the employer's written policies; or
• Other legitimate business reasons determined by the employer while exercising the employer's reasonable business judgment.

Q: We aren't in Montana. How can I reinforce at-will employment among my employees?

A: Here are some best practices for reinforcing at-will employment:

• Prominently display an at-will employment statement in the beginning of your employee handbook. Reinforce at-will status in your handbook acknowledgment form as well.
• Avoid policies that may create confusion about at-will status, such as those that restrict your ability to decide what type of discipline is appropriate given the severity of the offense and the employee's history of misconduct. State that violations may result in disciplinary action, up to and including termination, and that the company reserves the right to decide what disciplinary action to take in any given situation. Keep in mind, however, that treating employees fairly is key, and similar situations and past practices should guide and impact the disciplinary action that you take.
• Train all supervisors to avoid using language or making statements that may be construed as an offer or promise of future employment.

Q: Why would employers use probationary periods?

A: Probationary periods originated in union environments. It was a way for employers subject to a collective bargaining agreement to have a short period of time to evaluate employees where they would not be governed by the same termination requirements as during the regular employment period. 

Some non-union employers have since adopted the practice believing it is a way to assess a new hire’s skills and qualifications without the burden of following certain requirements that come with the employment relationship. 

Some employers also misconstrue the probationary period to mean that they would be free from wrongful termination lawsuits should the relationship not work out. This belief, however, is not true. New hires generally have the same protections as other employees and can be terminated at any time during the employment relationship. Having a special probationary period does not change that.

Q: How can I help employees understand my company’s probationary period policy?

A: If your company requires that new employees enter into a probationary period, make sure that your probationary period policies and procedures are carefully worded and applied consistently to all new hires. If your employees work outside of Montana, your policies should make clear that upon successful completion of the probationary period, the status of the new hire’s employment will remain "at-will." The policy should also make clear that "at-will" status is in effect even during the probationary period. Consider consulting with legal counsel to ensure that their probationary period policies are drafted and implemented properly.

Q: What about an introductory period, training period, or orientation period? Are these different?

A: Some employers use an "introductory period," "training period," or "orientation period." However, they all generally refer to the same type of initial period. And, if not handled correctly, they all run the risk of confusing employees regarding their employment status. Employers should carefully assess the benefit of having introductory periods, and if they wish to continue using them, consider working with legal counsel to develop and implement such policies.

Q: Without probationary periods, how can my company help make sure new hires are (and will continue to be) a good fit?

A: Employers should develop an effective hiring process to help find the best candidates for the position. During the interview process, employers should ask job-related and behavioral-based questions, and, where appropriate, should conduct post-offer job-related background and reference checks to help determine whether candidates have the potential to succeed in the open position.

Once hired, all employers should provide new employees with a comprehensive orientation process to familiarize them with the company (and vice versa). Supervisors should work closely with new hires, giving them the information, tools, and support they need to succeed. Supervisors should also establish clear goals, provide feedback and coaching regularly, and evaluate performance proactively and consistently.

Q: Without a probationary period, can my company require new hires to wait before they enroll in our health plan or are eligible for paid time off?

A: The Affordable Care Act ("ACA") prohibits group health plans from applying a waiting period that exceeds 90 days for individuals otherwise eligible to enroll. Under the ACA, health plans are permitted to use "orientation periods" without violating the 90-day waiting period rule if the following requirements are met:

• The period is not more than one month.
• The 90-day waiting period begins on the first day after the orientation period.

Generally, employers may also establish reasonable waiting periods for employees to become eligible for voluntary company-provided benefits, such as paid time off. 

Q: If employees are terminated during their introductory period, are they disqualified from unemployment benefits?

A: The fact that an individual was terminated during an introductory period would not disqualify the employee from unemployment benefits. The same rules regarding eligibility for unemployment still apply. However, length of employment may be a factor in determining how much the employer will be impacted by the employee’s unemployment claim.

Conclusion

Make sure you understand at-will employment in your state, and avoid using policies, statements, and practices that could inadvertently undermine employees' at-will status or employee morale.