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Employment and Migration Blog

Employee Performance Improvement Plan: What you need to know

Posted by Shanni Zoeller on 2 Jun 2021

Assisted by Kristina Tato

When an employee is found to be underperforming, the start is for the employer to discuss the issue/s with the employee (usually informally). More often than not, the employee will improve after this discussion.

However, this is not always the case. When there continues to be disparity between the level of expectation and delivery of tasks and functions of the employee, a more formal and documented performance management process should be initiated; the introduction of a Performance Improvement Plan (PIP).

But what happens if an employee argues that the PIP is unreasonable? What are some of the things that employers can do to combat this argument?

Some guidance has been given from the Fair Work Commission in the case of Jayde Paranihi v Roy Hill Holdings Pty Ltd [2021] FWC 1493 (30 March 2021).

Jayde filed a general protections application claiming that the employer used unreasonable performance management plans to force him to resign. A general protections application is usually made because an employer has taken adverse action against an employee for exercising a workplace right or for other reasons such as discrimination. Before looking at whether the dismissal contravened general protections, this case had to firstly deal with whether Jayde had been dismissed in the first place.

Allegations & PIP

Jayde received a first and final warning in 2019 after he was found to be using his mobile phone (for over an hour because he was watching a sporting event) during work hours. Jayde also made attempts to conceal use of his mobile phone throughout the day.

An investigation was conducted by the employer and Jayde admitted to the allegations.

Around the time of the disciplinary process, Jayde was offered a settlement agreement and was told that if he did not accept it, he would be placed on a PIP. A copy of the proposed PIP was then provided to Jayde. Jayde chose to undergo a PIP rather than resign and accept the settlement offer.

Employee arguments

Jayde argued that the daily line count target of 150 freight items was “impossible” and subsequently took periods of leave for “stress related medical reasons” caused by work pressure. Jayde also argued that the further extension period of the PIP and changing of dates and times for the PIP meeting in February 2020, were all part of a plan to make him resign.

Jayde ultimately resigned on the basis that the PIP targets and threat of termination led to him being admitted to hospital.

Employer arguments

The employer argued that they did not plan to terminate the employee and the PIP was designed to give him another chance. They also stated that the PIP targets were reasonable given the general target was 166 freight items for other people in the same area who also performed additional tasks. This was also the target for Jayde before he was placed on the PIP. Jayde’s PIP target was also lower to ensure that he could focus on one task and meet the KPI’s set.

Finding

The Commissioner stated that the use of a PIP was a commonly used process and the employer had “sound reasons” for imposing the PIP. The targets contained in the PIP were also “reasonable and achievable” on an objective assessment. The employer took into account the average KPI target for employees in a similar area and lowered it for Jayde. It was found Jayde had in fact reached the target on some days, and on days where it was not met and Jayde had provided a valid reason as to why, it was deemed that he met the KPI.

It was also noted that the employer provided Jayde with “several options” apart from resigning where the employee could have also just remained in employment and see whether the employer would have decided to terminate employment down the line. Jayde could have also decided to go through the dispute settlement procedure route stated in his employment contract, but did not do so.

Whilst an employee may find that the PIP can be “challenging and upsetting”, the Commissioner found that the employer’s conduct did not force the employee’s resignation and subsequently dismissed the application. The employee had other options apart from resigning and it was deemed to be a voluntary resignation.

As Jayde was not dismissed, the employee was not entitled to make this application and the application was dismissed as the Commission had no jurisdiction to deal with the issue. 

In this case, if it had been determined that Jayde was dismissed, the basis of lodging the application would likely be that Jayde had exercised a workplace right, such as making a complaint about the PIP and as a result, adverse action had been taken against Jayde for exercising that right by way of forcing him to resign.

What to consider before proceeding with a PIP

Before pressing ahead with a performance management process, you will need to consider whether you have “sound reasons” for doing so.

If there are doubts, alternative options should be considered – for example, if it’s not performance based, rather it is unacceptable conduct, a disciplinary process should be embarked upon instead.

If the foundations of your performance management process are less than sound, it may compromise the legitimacy of your process and potentially taint the outcome you reach at some future point in time. Further, it could also lead to other claims being made by the employee against the business, so you may find yourself dealing with litigation in different jurisdictions.

Where an employer presses ahead with a PIP, targets and KPI’s that need to be met by the employee should meet the SMART criteria. Such targets and KPI’s should be discussed with the employee and his/her input sought. Once the PIP has been finalised, put it in writing; it is imperative that you continue to monitor the employee’s performance against it. If the employee has failed to meet the standards, action should be taken (by way of issuing a written warning) and this may lead to termination. If a claim is subsequently made by a terminated employee, you will be putting yourself in the best possible position to defend the claim.

If you have any questions about the performance management process, please do not hesitate to contact a member of Coleman Greig’s Employment Law Team, who would be more than happy to assist you today. 

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