A CEO's contractual exclusion of probation: Taylor v In My Mind

The Court of Appeal upheld the effect of a CEO’s contractual exclusion of probation under the law applicable when he entered employment. The decision displaced the Tribunal’s treatment of the dismissal as a termination during probation, while leaving the substantive fairness of the dismissal to be determined on remittal.

Appointment and dismissal

Taylor entered a full-time, indefinite employment contract as chief executive on 1 December 2022. The contract stated: “Probation Period: N/A”. He had previously provided services to the company, but the appeal ultimately did not require the Court to determine the effect of that earlier engagement.

On 28 March 2023, Taylor received an email terminating his appointment immediately. The employer’s documentation treated the departure as termination during probation. Taylor challenged that position and relied on the express exclusion in his contract.

The Tribunal dismissed his claim on the basis that probation applied. It did not fully determine the employer’s performance allegations because it regarded the probation issue as conclusive.

The appointment date determined the applicable law

An amendment to the statutory probation provisions had entered into force on 20 December 2022, after Taylor signed the contract and began the CEO role but before his dismissal. The Court therefore first identified the legally relevant date.

It selected 1 December 2022. Probation concerned the conditions under which Taylor began that employment. Neither the later termination date nor the date on which proceedings were brought displaced the law governing that appointment. The Court considered the Interpretation Act and found no basis for treating the later amendment as undoing the contractual arrangement made under the earlier provision.

Under that earlier law, the Court held that the parties could exclude probation. It relied both on the statutory language and on earlier authority recognising an agreed exclusion. The wording applicable to qualifying executive appointments also permitted a different contractual arrangement.

The brief entry “Probation Period: N/A” was sufficient to show that probation did not apply. There was no pleaded challenge requiring the Court to invalidate the contract because Taylor had signed in both his employee capacity and as a company representative.

What the appeal resolved

The Court found that Taylor had not been dismissed during an applicable probation period. It overturned the Tribunal’s contrary reasoning and sent the proceedings back to a differently constituted Tribunal. The parties were to have the opportunity to present further evidence and make fresh submissions on the merits.

The Court did not award dismissal compensation or finally decide that the termination was unfair. Once the probation issue had been resolved, there was no need to decide the alternative arguments about Taylor’s previous services.

Significance for executive appointments and exits

Probation can materially affect the assumed freedom to end a newly appointed executive’s employment. This judgment shows the risk of relying on a standard probation description without first reading the appointment agreement and identifying the legislation governing it.

It also separates two questions that can otherwise become confused in an exit negotiation. Establishing that the employer could not rely on probation does not, by itself, establish the final merits or value of an unfair-dismissal claim. It changes the basis on which the employer must defend the termination.

The reported holding is tied to the law applicable on 1 December 2022. It should not be presented as a universal answer for every later executive contract. The Court gave effect to this contractual exclusion and required the remaining dismissal dispute to be heard on its merits.

Related: Probationary period · Incoming executive review