Published 18 May 2015
Managers who fail to tackle promptly and effectively the problem of under-performing employees risk long-running and, possibly, expensive headaches with important legal ramifications.
Not only can poor performers undermine the efforts of co-workers and harm workplace culture, their failings can have nasty consequences for the bottom line.
My experience working with businesses who have this problem has shown that, too often, underperforming employees have not properly been made aware of their poor performance issues. Real difficulties emerge when managers:
- fail to act decisively and skirt around the poor performance issues;
- are too concerned about confrontation or discomfort to raise the matter; or
- are too busy to tackle the problems.
Early, decisive action is crucial. Companies regularly seek my advice on handling employees who have been under-performing for years. Worryingly, where an employee has been allowed to underperform for so long their misunderstanding of what is required of them often becomes entrenched. As a result, such employees often react with real resistance when challenged on their performance.
Failure to act early and decisively on poor performing employees can often lead employers into legal difficulties when the employer finally decides to move. Commonly-arising legal issues in these circumstances include claims of constructive dismissal or unfair dismissal, adverse action, breach of contract, discrimination and workers compensation claims.
Failure to confront the issue not only affects the workplace culture and co-workers, but can also affect a company’s bottom line. Acting promptly and with certainty when managing poor performing employees will reduce legal risk, improve workplace morale and, thus, benefit business.
In a recent unfair dismissal case before the Fair Work Commission it was held that a sales manager working for a carpet company was unfairly dismissed due to poor performance as he had been given no opportunity to improve and no warning. Senior Deputy President Richards noted:
“Where an employee is put on notice at an early point as to their employer’s concerns with their apparent capacity or performance, an opportunity is required for rectification.”
This case, Roger Byrnes v Tuftmaster Carpets Pty Ltd  FWC 1039, highlighted a clear requirement to tackle poor performance at the earliest stage possible.
All too often managers put off raising performance issues individually with employees when they arise either because they have too much on their plates or they are want to avoid possible hostility or other highly emotive reactions. I caution managers against any delay as it will inevitably lead to bigger performance issues down the track. Putting off these discussions can result in the managers spending even more time dealing with the issue and incidental factors, such as complaints from colleagues and recruitment being required if other staff leave due to this inaction.
Early action, such as a one-on-one meeting with the employee and issuing a warning, if required, need not be overly onerous or uncomfortable. After all, this should be part of a manager’s role and requires the employer to know exactly what performance they require from their staff. Having prompt discussions when a matter arises can often result in its resolution, or if this does not occur a lawful termination can take place down the track.
In Ken Goodwin v Hadfield industry’s Holdings T\A Arvo Steel Roofing  FWC 4793 it was held that generalised “pep-talks” with a long term employee were not enough to constitute a warning. The employer in this case submitted evidence of many conversations over two years with the employee about poor performance. The Commission held that these conversations were not decisive enough and were too non-specific in nature to constitute properly raising the poor performance issues or issuing a warning.
Employers must ensure they act decisively when talking to employees about their poor performance. It is not enough to skirt around the issue or to raise performance concerns broadly in a group context. Employees should be spoken to plainly and frankly about their poor performance, including being informed that if they do not improve, their employment may be terminated. Confirming the conversation, including the possibility of termination of employment, in an email or letter is also highly advisable.
The full bench of the Fair Work Commission in the matter of Heian Building Group Pty Ltd v Eduard Anneveltd  FWC FB 4744 at  reaffirmed the previous Australia Industrial Relations Commission Full Bench decision and reasoning in the matter of Fastidia Pty Ltd and Goodwin where it set out that:
“…a warning must;
- identify the relevant aspect of the employee’s performance which is of concern to the Employer; and
- make it clear that the employee’s employment is at risk unless the performance issue identified is addressed.
In relation to the later requirement, a mere exhortation for the employee to improve his or her performance would not be sufficient.”
To ensure that employers are doing more than generally appealing to employees to improve they must:
- Be as specific as possible about what constitutes the poor performance, including referring to any relevant position description, dates or actions not met.
- Detail how the employee can improve their performance to the required standard, including providing specific actions to be undertaken and deadlines to be met.
- Set out a reasonable timeframe within which the employee must improve.
- Where appropriate, support the employee by, for example, providing internal additional training or additional meetings with their manager.
Acting decisively and promptly is fundamental to managing employees’ poor performance and ensuring that these issues do not get out of control. By drawing lessons from Fair Work Commission case law, employers can dramatically minimise the legal risks associated with managing poor performers while also benefiting the bottom line.
The content of this publication is general in nature and provides a summary of the issues covered. It is not intended to be, nor should it be relied upon, as legal or professional advice for specific employment situations. PCC Employment Lawyers recommend that specialist legal advice should be sought about specific legal issues.