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Help Center - Hiring
Question:
We have a manager who wants to hire a salesperson on a (contract to hire) type of spot. If he does well after 60 days he would then be able to be hired on full-time. During this contract period he would not be entitled to benefits. Are we ok to hire this way? Here is the offer letter that was drafted... It is with great pleasure that I offer you a position with Citynet. We are excited about you joining our team and the positive impact that you will have on our company. I offer you an initial position as a CONTRACT FOR HIRE employee in our Sales division reporting to Ben Randolph. We would like for you start your term with Citynet on March 10, 2014. Your exact duties will be more defined prior to your starting date. Pay periods are bi-weekly. Your pay for a period will be $1538.47. As a member of the Sales division, you may be privileged to addition compensation through commissionable sales or other incentives. The CONTRACT FOR HIRE term would be from your actual start date for a period of 8 weeks, at which time Citynet may choose to renew the contract for an additional term, transfer your position to a full time employee, or neither. Should your position transfer to full time employment, Citynet also has a 401(k) savings plan in which you may elect to participate as an employee. You will be able to contribute a percentage of your pre-tax income, and the company will match up to 3% annually. As an employee, you will accrue 6.66 hours of vacation time per month and eight paid holidays per annum. Likewise you will accrue sick time and personal days as outlined in the Citynet Employee Handbook. Please see the attached Citynet Employee Benefits Package Summary. Herman, nothing in this letter or during any conversation, is intended to create a contract, as Citynet, LLC is an employment-at-will and an Equal Opportunity Employer. Please sign in the space provide below to indicate your acceptance of this position and the terms of your employment, Congratulation
Response:
We can provide the following general guidance that hopefully will be of assistance. First, it is not clear why your company wishes to hire a candidate on a trial basis as a "contract" employee rather than simply as a regular employee. Given that the intention seems to be to retain the employee if he successfully meets performance standards after an initial period of time, we assume the purpose is to use such time to determine if the employee is a "good fit," and, if not, retain the right to end the employment relationship. It is important to note that so long as the employment relationship is at-will (i.e., there is no employment contract guaranteeing employment for a specified period of time), then there is no need for employment to be on a probationary basis because the employment relationship can be ended at any time -- either during the initial 60-day period or at any time thereafter.
That said, an employer is within its rights to designate the initial period of employment as a "probationary" or "introductory" or "trial" period if it chooses to do so, and for 60 days or some other period. Moreover, the definitions for temporary, full-time and part-time employment are left up to the employer, even for the purpose of offering health and welfare benefits and/or other fringe benefits such as paid time off, although you may have one or more applicable benefit plan documents that defines the term specifically. To the extent there is retirement, health insurance or other benefit plan documents that expressly provide certain eligibility requirements; you would need to review those documents for specific guidance. Keep in mind that to avoid a discrimination claim, an employer should treat similarly situated employees consistently. This means that if employees designated internally as "temporary" (or a similar term) work the same period of time as those who are defined as non-temporary, but the non-temporary employees are entitled to benefits, the employer will want to reconcile the differences to avoid a claim. Moreover, the federal Patient Protection and Affordable Care Act (ACA) may have other requirements as well in terms of eligibility. Within the format of the HELPLINE, we are not able to provide specific advice as to health care benefits law as our focus is primarily on employment law. See http://www.dol.gov/ebsa/healthreform/ for resources relative to the ACA.
Beyond this, the biggest potential pitfall with establishing a formal introductory, probationary or other similar period is that it can unintentionally create a contract for employment by doing so. Indeed, unless the employer really wants to create a contract of employment for the designated period of time, or otherwise guarantee employment after the period ends, it should be careful to ensure that any probationary/introductory period of employment and any period of employment thereafter, remains at all times at will, such that either party can terminate the employment relationship both during and after the initial employment period (and it appears that this is your intention). Otherwise, an employee may be able to argue that he or she was guaranteed employment for the initial probationary or introductory period, and/or was guaranteed employment after that period concluded, and may seek to file a breach of contract action (and pursue future wages) if the employer seeks to terminate the employment relationship during either period. Note that even for a "probationary" employee, appropriate on-boarding documents (such as the I-9, W-2, etc.) must be completed.
In sum, other than in connection with employee benefit offerings, probationary and introductory periods for purposes of performance evaluation and review often serve little purpose in an at-will employment arrangement, because the employment relationship is ordinarily terminable at the will of both parties at any time, both during and after the initial (probationary/introductory) period of employment. Employees can and should be told that they are expected to meet performance expectations at ALL times during their employment, and not just during the first few days/weeks/months that the employer designated as probationary or introductory, etc. If you wish to move forward with establishing a probationary or introductory period, we recommend that you consult with local counsel for guidance in drafting or reviewing a policy or any correspondence with the employee to this effect to ensure it meets your needs and does not create a contract by which the employer does not wish to be bound.
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