If you tell an employee that the first few months of his or her employment is a probationary period, you may be creating an implied contract for permanent employment.  Permanent, meaning life long, until death do you part or the income tax laws are repealed, whichever comes first.  Employers have probationary periods because they mistakenly believe that during a probationary period they can terminate the employee for any reason, which gives them comfort that if they hire someone that does not work out, they can fire him or her quickly without repercussion.  By contrast, employers frequently believe that after the probationary period, they may only terminate an employee for a few specific reasons that our outlined in the employee handbook.  To add to the problem, it is common for managers to refer to employees that have completed their probationary periods as “permanent” employees.  Because of these practices, some courts have held that when an employer has these types of policies, it is reasonable for an employee to expect that he or she has an implied, if not express, contract for employment of an unlimited duration.
 
The idea behind a probationary period of employment is not all bad.  It allows the company to evaluate an employee’s performance and the employee to determine if he or she likes the job before a lot of time, money and effort are invested in the relationship.  To create a trial period of employment and avoid the legal pitfalls that can occur, there are 4 things a company should do.
 
Orientation or Introductory Period
It is better to call the trial period either an orientation period or introductory period instead of a probationary period.  The reason is that these terms do not imply that employees who complete the trial period become “permanent” employees and are entitled to remain employed as long as they choose.  Rather, they imply that it is more of a time to get acquainted.
 
Regular vs. Permanent
Refer to employment as “regular” instead of “permanent,” which implies unending.  Regular does not imply that the employment is of any specific length; only that it is ongoing.  Therefore, employment will be either regular or temporary if it will only last for a specific duration or project.  The term regular should be used even for employees who have not completed their introductory periods instead of distinguishing between those employees who have completed it and those who have not.
 
At-will Employment
The general rule in most states is that, absent an agreement stating otherwise, employment relationships are at-will, meaning that either the employer or employee can terminate the relationship at any time, for any reason, with or without cause or notice.  There are a couple of exceptions, such as in Montana, where state law requires employers to have a probationary period and employees who have completed the probationary period may only be terminated for cause.  Unless your company is in Montana, it is important to inform employees that, at all times, even after the introductory period, employment with the company is at-will.  This should be stated clearly and defined throughout the employee handbook and in the acknowledgement statement that employees sign stating that they have received a copy of the employment policies.  It should also be stated in the job application, job description and offer letter.  It is necessary to include it in all of these places so it is clear that there is no guarantee of employment of any length.
 
Probationary Periods in Corrective Action
When giving corrective action to an employee, it is common for managers to put employees on probation.  The idea is that if there are any further performance problems during the probationary period, the manager may give the employee further corrective action or terminate the employee.  The downside is that this can lead employees to believe that if they can survive the probationary period without any problems, they will not receive more severe corrective action if they have problems after the probationary period.  It is better to establish a specific time frame for performance to return to the expected level without calling it a probationary period and then state that performance must meet or exceed that level from that point forward.  For example, a manager could say,
 
Over the next 30 days, John must bring his error percentage down from 5% to 2% and keep it at or below that level.  John and I will meet weekly during the 30-day period to discuss his performance and take any necessary action including additional training or corrective action.  If John’s error rate does not drop to 2% by the end of the 30-day period or if, prior to the end of the 30-day period, it does not appear that he will reach 2% by that time, or if John’s error rate goes above 2% after the 30-day period, he may receive further corrective action up to and including termination.
 
The example accomplishes the same purpose as a probationary period without creating an expectation for the employee that he will not be subject to corrective action after the 30-day period is over.
 
Conclusion
Implementing these steps should minimize the risk of lawsuits caused by the use of probationary periods.  Establishing orientation or introductory periods, referring to regular employment instead of permanent employment, explaining the company’s policy of at-will employment and not using the term probationary period in corrective action will help employees understand their relationship with the company without creating the misconception that employment will be unending.