Termination of Employment during Probationary Period

MG Law Office, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ana Kochiashvili, Tamar Jikia, associate Mariam Kalandadze, junior associate Ana Jikia and paralegal Lasha Machavariani is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

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The Labor Code of Georgia (the “Labor Code”) determines that termination of the employment during probationary period is not subjected to the standard termination grounds and consequences applicable to the dismissal of an employee. Above regulation substantially reduces the burden of proof for the employer who, according to the wording of the law, seems at liberty to exercise the power to terminate an employment at any time and without cause during the probation. However, the latest case law of the Georgian courts suggests that the above reading of the law may not be entirely correct and the employers should take into consideration the court developed practice in relation to the termination of employment during probationary period.

Legal Framework of Probation

The Labor Code allows parties to agree on a probation for the maximum period of 6 months. Such agreement shall be in the form of a written contract and represents a limited one-time option, depriving an employer the right to either prolong probation or re-hire an employee on the same position for an additional probationary period. The Labor Code further establishes that the sole purpose of the probation is to enable parties to determine fitness of a person for the work to be performed. Upon expiration of the probation, the employer is entitled to either continue the employment relations with an employee or to terminate them.

During the probation period, the employer is entitled to terminate the employment at any time and the rules and consequences set out in Article 38 (setting out timing of termination, obligation of the employee to explain the reasons, termination compensations, etc.) are not applicable during the probation unless otherwise agreed by the parties. As mentioned, the above language has been initially interpreted as allowing the employers to terminate employment during probation without any cause at any time. However, the latest case law suggest that the courts of Georgia have taken stricter approach towards employers in this respect.

Standards under Georgian Case Law

The case law of the Georgian courts has recently clarified its approach to the cases of termination of employment agreements with employees on probation. As the new case law suggests, the employer’s discretion is not absolute and there is a certain standard to be met, as will be discussed in further details below.

The Supreme Court of Georgia ruled that general grounds for termination of employment does not apply to the cases of probationary period, as the above represents a part of overall protection guarantees provided by the Labor Code only to the employees who have successfully completed their probation or do not have probation period at all. The court noted that placing such a heavy burden of proof would undermine the idea of probation period, which envisages considerable autonomy for the employers.

That being said, the respective case law (especially at the level of the Supreme Court of Georgia) suggests that the sole ground for the termination of an employment on probation is an employee’s unsatisfactory performance and incompatibility. Accordingly, unsubstantiated dismissal of an employee contradicts with the recent case-law and the employers are generally required to prove the above ground of termination. Notably, there is no universal definition of unsatisfactory performance as it is a heavily facts-based issue.

The case law of the Georgian courts varies on the level of scrutiny applicable to the decision to terminate an employee on probation. Judgment of the Supreme Court of Georgia rendered in 2017 envisaged employer’s obligation to furnish an employee with a detailed reasoning for the termination of employment when the dismissal occurred before the exhaustion of the full probationary period. The court deemed such cases to be exceptional as an employee was not granted adequate time and possibility to present her skills and capacity. However, the recent case law of the Georgian courts has evolved and today it is generally established that only a limited scope of judicial review is available. In that sense, courts will not replace employer’s assessment with its own, as long as the latter is able to present a set of evidence attesting unsatisfactory performance of an employee. Understandably, such evidence varies for each individual case.

Moreover, the Supreme Court of Georgia has determined two exceptions, which entitles the court to broaden its powers of judicial review and to engage proactively, if the claimant alleges that (i) dismissal was based on discriminatory grounds; or (ii) an employee was deliberately deprived of the possibility to demonstrate own skills and performance.

Standards of International Labor Organization

Under the standards of the International Labor Organization (ILO) termination of the employment contract during probation period by either party requires no justification and gives no entitlement to compensation. Therefore, ILO allows member states to exclude probation employees from the following guarantees: (1) protection against unfair dismissal; (2) different valid grounds for dismissal, as compared to the general regime; (3) different notification or severance pay rules; or (4) various combinations of these cases.

However, ILO Tribunal implements more complex approach and obliges an organization which requires a staff member to undergo a probation period to set objectives for such employee so that he is aware of the criteria that will be used to assess his performance. Furthermore, if an employer finds employee’s performance unsatisfactory, it shall inform employee timely and attempt to remedy the situation by warning employee of the risks related to termination.

In accordance with this, the Administrative Tribunal of ILO (dispute resolution body) has set firm line of precedents stating that there is no general principle of law that requires an organization to retain employee if the employer concludes that such employee is unsuitable for the position assigned. Moreover, decision not to continue employment relations falls within discretion of the employer. Therefore, the ILO Tribunal will not interfere with that decision unless (i) it was made without authority, or in breach of procedure, or (ii) it was based on a mistake of fact or of law, or (iii) it overlooked some essential facts, or (iv) it amounted to an abuse of authority, or (v) if mistaken conclusions were drawn from the facts.

Summary and Recommendations

The case law of the Georgian courts develops alongside the ILO standards. The recent practice has given the court an ample opportunity to make important interpretations and set guidelines for the employers. In this sense, the respective employment mechanisms discussed above shall be implemented with great diligence, in light of the object and purpose of the probation, as set out in the Labor Code and employee shall be consulted at all times. Additionally, an employer shall aim to meet the burden of proof to demonstrate lack of qualifications and/or compatibility of the dismissed probationer. It is recommended that the employee is given periodic feedback on her performance during the probation period and the employer duly documents the relevant details. Please note, the termination of employment should be the last resort to be exercised if the parties fail to reach an amicable solution.

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Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

MG Law is the first full-service law firm in Georgia to be founded by international partners. The firm advises a diverse group of Georgian and foreign companies, financial institutions, investment funds, governments and public enterprises.

Among many other areas, the firm primarily focus on the following sectors: Banking & Finance, Capital Markets, Arbitration & Litigation, Labor & Employment, Infrastructure and Project Finance, Energy Law, Real Estate, Tax and Customs, Investment Law, Corporate Law, and Cryptocurrency & Blockchain.

For more information, please visit www.mglaw.ge or contact Archil Giorgadze at archil.giorgadze@mglaw.ge and Nicola Mariani at Nicola.mariani@mglaw.ge

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