Managing Underperformance Requisite HR August Newsletter 2017
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How to Manage Underperformance Employees can underperform in many ways. Underperformance can manifest through: • • •
Unsatisfactory work performance; Non-compliance with policies; and Disruptive or negative behaviour.
If a team member is not performing to the standards that their job requires, it is important that you undertake performance management before considering the option of dismissing the employee. If a team member is dismissed due to poor performance and has not been given any documented performance management, this can be a significant factor that the Fair Work Commission (FWC) will take into account if the team member brings a claim for unfair dismissal following their termination. Employees have 21 days from the date of their termination to bring an action for unfair dismissal. If you employ 15 or more employees, they must have been employed for at least six months before they can apply for unfair dismissal. If you employ fewer than 15 employees, you are a small business employer, and the employee must have been employed for at least 12 months before they can apply for unfair dismissal. Small business employers are required to follow the Small Business Fair Dismissal Code (Code) with regards to the dismissal of underperforming employees. Specifically, the FWC will consider the Code in assessing whether a dismissal was “harsh, unjust or unreasonable”. The Code requires that employees: 1. are given notice of the dismissal; 2. received warnings prior to the dismissal; and 3. were provided with a valid reason for the dismissal and an opportunity to respond and to improve. Whether you are a small or large employer, effective performance management will mitigate against the risks of employees bringing an action in the FWC, and will assist your defence if an employee does bring a claim for unfair dismissal.
What employers should do The Fair Work Ombudsman’s Best Practice Guide for Managing Underperformance outlines the following steps that should be taken by employers when managing underperformance: 1. Identify the underperformance; 2. Assess and analyse the underperformance; 3. Meet with the employee to discuss the underperformance; 4. Jointly devise a solution; and 5. Monitor performance.
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How to Manage Underperformance Whilst a Performance Improvement Plan can be a strong indicator to the FWC that you have followed a sufficient performance management process, a recent case has found that the performance management process does not necessarily need to be fully formalised:
Mr Robert Etienne v FMG Personnel Services Pty Ltd [2017] FWC 1637 Mr Etienne worked as an Inventory Controller at FMG Personnel Services. It became clear to Mr Etienne’s supervisor in September 2015 that Mr Etienne lacked the necessary skills and knowledge to perform his role, and his manners and attitude to customers and co workers were unsatisfactory. Mr Etienne’s supervisor arranged for another employee, Mr Kenny, to sit next to Mr Etienne so that Mr Kenny could provide him with informal coaching on a daily basis. After over nine months of this informal performance management, Mr Etienne’s supervisor decided to place Mr Etienne on a formal Performance Improvement Plan. Mr Etienne’s supervisor discussed this with Mr Etienne, but Mr Etienne did not accept that his performance was inadequate. As a result, Mr Etienne’s employment was terminated. He brought an action in the FWC, however this was unsuccessful. In this case, the Commissioner found that whilst there were no formal performance management processes followed, the dismissal was fair because the employer made conscious and concerted efforts to assist Mr Etienne to improve his performance.
What employers should not do Recent cases that have come through the FWC have provided examples of what not to do when performance managing your employees.
1. Don’t ignore the underlying causes of the performance issues It is important to make a concerted effort to understand and help address the issues that are underpinning the poor performance of an employee before taking disciplinary action.
Case study: John Finnegan v Komatsu Forklift Australia Pty Ltd [2017] FWC 2433 Mr Finnegan was placed on a Performance Management Plan as he had failed to meet his KPIs. Later, it became clear to the employer that Mr Finnegan was having difficulties working under a new manager and was experiencing mental health problems. The employer placed Mr Finnegan on sick leave due to concerns about his behaviour and work performance. Mr Finnegan attended a medical assessment, which recommended that Mr Finnegan return to work under a different manager. Mr Finnegan returned to work under a different manager but was then moved, and expressed his worries about returning to work with his original manager. The employer instructed Mr Finnegan to leave the workplace. Mr Finnegan was then on sick leave for a period of more than three months before the employer terminated his employment by email. Mr Finnegan brought an unfair dismissal claim in the Fair Work Commission, which was successful. In this case, the factors influencing the employee’s performance were his mental health issues and his personal issues with his original manager. If the employer had addressed these issues before placing the employee on a Performance Management Plan, Mr Finnegan may have been able to continue working in a different area. The Quadrant, 1 William Street Perth Western Australia 6000
Tel +61 8 9288 6000 Fax +61 8 9288 6001
lavan.com.au
How to Manage Underperformance The Fair Work Ombudsman’s Best Practice Guide for Managing Underperformance identifies many reasons why an employee may perform poorly, including unclear goals or standards, interpersonal differences, a mismatch between employee’s capabilities and their job, lack of feedback, low morale in workplace, personal issues, cultural misunderstandings or workplace bullying. It is important to consider these underlying issues when addressing the problem and devising a solution.
2. Don’t be vague about your employee’s underperformance when meeting with your employee Once you have identified, assessed and analysed the problem, it is important when you meet with your employee to discuss the problem that you clearly outline the areas in which they are underperforming, and highlight to them that if their performance does not improve, disciplinary action, including dismissal, may occur.
Case study: Desapriya Fernando v South Oakleigh Club Incorporated T/A South Oakleigh Club (SOC) [2016] FWC 8572 Mr Fernando was a Head Chef at a local club. The employer made the decision to terminate Mr Fernando’s employment before holding any discussions with him, but then used a subsequent council report of the club as an excuse to ‘warn’ Mr Fernando of his poor performance in keeping the kitchen clean. However, this ‘warning’ involved Mr Fernando’s manager having informal discussions in the kitchen with him – the manager’s diary entries, which he wrote just prior to the actual hearing, said “mention to chef that kitchen needs to be cleaned especially under fryers fridges etc” and “talk to chef re state of kitchen”. The chef was not told that either of these meetings were about his performance. The Commission ultimately found that this was not sufficient for performance management, and that the Chef had been unfairly dismissed.
3. Don’t be rushed in your performance management process Case study: Ms Catherine Purcell v Rock N Road Bitumen Pty Ltd T/A Rock N Road Bitumen [2017] FWC 486 Ms Purcell worked with the employer for 10 months as a HR officer. From 19 October 2015 to 16 August 2016, Ms Purcell believed she was satisfactorily performing her role. She was even granted a $5,000 pay rise in April 2016, and took this to mean that she was doing a good job. However, on 16 August 2016 the employer met with Ms Purcell and told her that he had done all he could to get her up to speed, but his attempts had been futile. He said there was no point in prolonging the situation and that it was time to part ways. Ms Purcell was given overnight to respond, and she responded to all the points that had been put to her at a meeting the next day. The employer telephoned her on 19 August 2016 and informed her that her employment was terminated. Whilst the Commissioner in this case accepted that the employee was not suited to her role and had failed to apply herself, the Commissioner’s view was that the dismissal was “premature” and the employee was not given enough time to improve. For these reasons, whilst the Commissioner said the reasons would had been valid if the employee had been given more time to improve, as the dismissal was so rushed, it was found to be unfair. This case demonstrates that performance management processes should not be rushed, and an employee should be given a reasonable amount of time in which to improve their performance. The amount of time that is reasonable will differ depending on the specific circumstances. The Quadrant, 1 William Street Perth Western Australia 6000
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How to Manage Underperformance Harsh, Unjust or Unreasonable? If you have gone through the process and spent a reasonable amount of time performance managing the employee without seeing any improvement, it may be time to consider dismissal. Once you have decided that dismissal is the way to proceed, there are additional considerations to make sure that the dismissal is not harsh, unjust or unreasonable. Lavan, a proudly independent Western Australian law firm, recommends the following checklist for employers: 1. Are you satisfied that you have effectively performance managed the employee and given them an opportunity to improve? Do you believe that this amounts to a valid reason for dismissal? 2. Do you have documents to support the performance management process that you have undertaken with the employee? 3. Can you ensure that the reason for the dismissal is not unlawful or discriminatory in any way? ie is there another unlawful reason other than the employee’s underperformance that is contributing to your decision to dismiss them? 4. Before making the decision to dismiss, have you considered other potential contributing factors to the underperformance and weighed up all relevant evidence? 5. Before a final decision has been made, have you notified the employee regarding their underperformance, including giving the employee sufficient detail regarding what improvements were required? This could be done through an initial meeting with the employee where the employee’s underperformance can be put to the employee as grounds for potential dismissal, unless the employee can improve their performance within a reasonable time. 6. Were you required to enable the employee to have a support person at the meeting to consider dismissal and did you do so? ie did the employee request a support person? 7. Have you given the employee an opportunity to improve their performance, and considered the employee’s response before a final decision has been made to dismiss the employee? ie you should avoid the perception that the decision is a foregone conclusion. 8. Have you considered any other matters relevant to the decision, including the employee’s length of service, employment record and relevant personal circumstances, before making any decision to dismiss? 9. Have you checked the termination of employment provisions in the employee’s contract of employment (or applicable award or agreement) to make sure that you have complied with these provisions? 10. If you have a Termination Policy or Procedure in place, have you complied with the steps outlined in that Policy or Procedure? 11. Is your action in dismissing the employee consistent with the way employees have been dealt with in similar circumstances in previous cases? 12. Have you kept a record of the relevant discussions with the employee? 13. Once a decision has been made to dismiss, have you notified the employee of the reason for dismissal and that the employment has been terminated, identifying the effective date, in writing? 14. Have you paid the employee all appropriate entitlements on termination? The Quadrant, 1 William Street Perth Western Australia 6000
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Charmaine Tsang Partner, BCom, LLB, MBA Direct dial: 08 9288 6799 Facsimile: 08 9288 6001 Mobile: 0411 109 232 Email: charmaine.tsang@lavan.com.au
Charmaine Tsang is a partner in Lavan’s Employment and Safety team.
Areas of expertise •
Employment and Safety
Qualifications •
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Master of Business Administration, The University of Western Australia (2009) (recipient of a Director’s Letter for academic excellence) Bachelor of Laws, Murdoch University (2000) Bachelor of Commerce, Curtin University (1997)
Charmaine is a highly experienced adviser on workplace and industrial relations matters covering industrial disputes, enterprise agreements, drafting policies and developing industrial relations strategies. She represents clients in the resources, construction and engineering sectors, as well as in commercial and professional services.
Admission details
Charmaine is experienced in conducting investigations of misconduct, discrimination, harassment and workplace bullying and works with clients on claims of unfair dismissal, adverse action, discrimination, corruption issues, breach of contract and disputes under enterprise agreements, and developing appropriate reponses to complaints and investigations by the Fair Work Ombudsman and other regulatory agencies. She provides court and tribunal representation for her clients.
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Charmaine advises clients on recruitment, selection, performance management, work practice changes, misconduct matters, termination of employment, confidentiality and post termination restraints. The Quadrant, 1 William Street Perth Western Australia 6000
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High Court of Australia (2004) Supreme Court of Western Australia (2002)
Memberships •
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Australian Human Resources Institute (Certified Professional) Industrial Relations Society of Western Australia Resolution Institute (formerly LEADR – Association of Dispute Resolvers) Association of Corporate Counsel The Law Society of Western Australia Women Lawyers of Western Australia Inc. The Institute of Quarrying Australia Australian Institute of Company Directors Women on Boards The Western Australian Chinese Chamber of Commerce Inc.
Tel +61 8 9288 6000 Fax +61 8 9288 6001
lavan.com.au