Should we keep using a 90-day probationary period to protect ourselves from wrongful termination lawsuits?

Probationary periods, better termed "introductory periods," can be an effective tool for you to evaluate performance and limit benefits eligibility for new hires. Keep in mind that some mandated benefits, such as the Affordable Care Act and mandatory paid sick leave, impose eligibility requirements. You cannot have a policy that requires a longer waiting period for mandatory benefits than is allowed under those mandatory laws.

The following misconceptions about introductory periods are also common:

Misconception No. 1

Introductory periods contradict at-will employment.

You may have heard that employment should be at-will from the first day, and that having an introductory period implies secure or guaranteed employment once the period is successfully completed.

However, the California Supreme Court clarified, in Dore v. Arnold Worldwide Inc.​, that simply having an introductory period does not contradict an employer's at-will policy. As long as it is made clear that employment is at-will throughout the duration of employment, having an introductory period is fine.

Misconception No. 2

An employee can be let go for any reason during the introductory period.

You might terminate an employee during an introductory period, telling the employee that "it just didn't work out." Many employers assume they are protected from wrongful termination or other lawsuits during any period they've defined as introductory. However, employees are protected from being fired for illegal reasons from the first moment they come to work for you. 

An employee terminated during the introductory period might claim the termination was due to discrimination based on race, sex, national origin or any of the other classes protected by law. Other claims might include wrongful termination in retaliation for reporting sexual harassment or for filing a workers' compensation claim.

Terminating an employee during an introductory period provides no legal protection against these claims. Therefore, you should always document a legitimate, nondiscriminatory reason for terminating an employee, even within the introductory period.

Misconception No. 3

Once the introductory period is over, it's a lot harder to fire the employee.

Introductory periods by themselves do not provide any particular legal protection to employers. Employment should clearly be at-will, both during the introductory period and for the entire duration of employment. Some keys to protecting yourself from legal claims stemming from introductory periods are:

• Have clear statements that employment is at-will in all employment documents, such as employee handbooks, offer letters, performance reviews, etc.
• Don't indicate that once an employee "passes probation," he/she becomes a "permanent employee." Those terms directly contradict the concept of at-will employment.
• Train managers so they know not to create oral contracts of employment by saying things such as "We're glad you're on board for the long haul" or "As long as you do a good job, you'll have a job with us."

Misconception No. 4

Introductory periods protect employers from unemployment insurance (UI) claims.

Employees are eligible for UI benefits even if they are terminated during an introductory period. To calculate an employee's UI benefit, the state looks at a "base period" of one year, starting anywhere from three to six months before the termination (depending on what month the claim begins in). Only employers who paid wages to the employee in the base period have charges made to their reserve account for that claim. 

You would not be a base-period employer for an employee who worked for you for less than three months. However, your UI reserve account may be charged if that same employee takes another job and quits or is fired during the period when you are the base period employer.​​​​