Before you consider “performance managing” an employee, read this!

We often meet with clients who are frustrated with an employee, and commonly they ask: “can’t I just performance manage him/her out of my business?”  While performance management is certainly an option for dealing with under-performing employees, it is by no means a “quick fix” and there are many legal traps employers need to be aware of before proceeding down this path.

Unfair Dismissal

An employee may have an unfair dismissal claim if performance management is not carried out properly.  Specifically, under the Fair Work Act 2009 (the Act), a dismissal will be unfair if it was “harsh, unjust or unreasonable”.  The Act contains a number of criteria for the Fair Work Commission (FWC) to consider the harshness (if any) involved in a dismissal, including:

  • Whether there was a valid reason for the dismissal related to the person’s capacity or conduct; and
  • If the dismissal related to unsatisfactory performance by the person, whether the person had been warned about that unsatisfactory performance before the dismissal.

Accordingly, employers must not dismiss an employee for minor performance issues, or fail to provide the employee with a reasonable opportunity to improve.  If the FWC determines that an employee was unfairly dismissed, it may order the employer to give the employee his/her job back, or to pay the employee compensation of up to 6 months’ pay.

Adverse Action

In addition to the unfair dismissal provisions, the Act prohibits an employer from taking adverse action against an employee (eg. disciplining/dismissing them) for reasons relating to a “protected attribute”, such as the employee’s age, sex, political opinions, or a temporary absence from work due to illness/injury.  It follows that employers must not use performance management as a disguise for disciplining or dismissing an employee for reasons relating to a protected attribute.

Employers who breach the adverse action provisions of the Act may be ordered to reinstate the employee, or to pay the employee uncapped compensation.  Further, an employer may be penalised up to $54,000 per breach, or $10,800 for a breach by an individual.

Bullying

On 1 January 2014, the Act was amended to include an anti-bulling jurisdiction.  Since then, a number of claims made by employees have included allegations of bullying by their employer via performance management.

The Act contains a definition as to when an employee will be “bullied at work”, which expressly states that bullying does not include “reasonable management action carried out in a reasonable manner”.  In hearing, FWC has provided the following examples of unreasonable conduct in the performance management process:

  • Vexatious allegations being made against a worker;
  • Spreading rude and/or inaccurate rumours; and
  • Conducting an investigation in a grossly unfair manner.

If an employee succeeds with their bullying claim, the FWC has the power to make any order it considers appropriate to prevent the worker from being bullied at work.  Arguably, this may include an order that the employer cease with an unreasonable performance management process.

Tips for effective Performance Management

It’s not all doom and gloom for employers seeking to performance manage an employee; there are a number of things employers can do to ensure an effective, lawful performance management process:

  1. Consider whether the under-performance is significant to justify performance management and a potential dismissal (we suggest that you seek legal advice on this point).
  1. Meet with the employee and explain the performance issues, providing a reasonable opportunity for the employee to improve.
  1. Re-visit the employee’s performance on the agreed date.  If the employee’s performance has not improved, you should consider obtaining advice regarding your next steps.

Please contact a member of Lynch Meyer’s Workplace Relations team if you require assistance with performance management.