Managing an under performing employee can often be a complex task, particularly in circumstances where the employee has shown signs of improvement, but their overall quality of work continues to fall below the minimum expectations.
In the recent unfair dismissal decision of Taylor v CJD Equipment Pty Ltd [2024] FWC2078, the Fair Work Commission (FWC) found that an employer had a valid reason for dismissing an employee who, after a lengthy performance review process, showed some signs of improvement but ultimately failed to achieve the minimum quality standards of his role.
The employee was employed as a Regional Sales Manager for CJD Equipment Pty Ltd (the Employer).
In or around February 2023, the Employer placed the employee on a Performance Improvement Plan (PIP) after a review revealed that the employee’s year-on-year quotes had dropped significantly compared to other sales representatives.
The Employer was particularly concerned about the volume and quality of the employee’s face-to-face (FtF) interactions with clients, quote delivery and number of uncontacted customers.
The PIP concluded in or around June 2023 and resulted in a finding that the employee’s overall performance was still below the minimum expectations outlined in the PIP. Although, the employee disagreed with this and told the Employer that his overall performance had improved, and it was only the “excessively high” FtF interactions which fell short of his KPIs.
The Employer scheduled two meetings in October and November 2023 to discuss the ongoing concerns. In the months that followed, the Employer observed that the employee’s performance still had not improved to the required standard. This resulted in the Employer providing the employee with:
The second and final warning provided the employee with a final one-month period to demonstrate an improvement in his performance.
During this final review period, the Employer collated evidence which showed that while the employee was tracking to meet his targets in February 2024, the quality of his work had not improved to the standard which was required. There was also evidence that the employee had misled the Employer by manipulating the data that he entered into its system, which it viewed as an attempt by the employee to meet these targets.
It is for these reasons that the Employer decided to dismiss the employee at the end of the final review period in March 2023.
The employee applied to the FWC claiming that his dismissal was harsh, unjust and unreasonable.
The FWC disagreed with the employee’s submissions that the KPIs provided to him under the PIP were unreasonable and that the warnings issued to him were “riddled with false accusations, uneducated opinion, hypocritical comments and vague statements”. Instead, the FWC found that the PIP was reasonable, and the warnings were a legitimate appraisal of the employee’s performance at that time.
Turning to whether there was a valid reason for dismissal, the FWC stated at [123] that “a failure to achieve a KPI in the course of otherwise competent or satisfactory work is unlikely to be a sufficient basis to ground an unfair dismissal”. However, it stated that an assessment of whether there is a valid reason for dismissal must be made in context.
In making this assessment, the FWC considered the Employer’s evidence about the nature of the employee’s role and its “compelling, precise and accurate portrayal” of the employee’s performance over the 2023 period.
The FWC stated that factors such as “intentionality, quality of interaction with a customer and engagement in those activities” were critical to the employee’s role as Regional Sales Manager.
The FWC found that the employee had failed to meet these minimum standards over a lengthy period of time, which in its view was concerning given his level of experience and the fact that he had held his position for over three years.
The FWC therefore found that, in the overall context, the employee’s failure to meet his KPIs constituted a valid reason for dismissal. It noted that while the employee’s performance had improved in the months leading up to his dismissal, his overall “quality” of work and preparedness to achieve his KPIs fell considerably short of the Employer’s minimum expectations.
In this regard, the FWC stated that “the standard of work that an employer can reasonably expect of an employee is one of competence, not perfection” – which in its view, the employee had failed to achieve.
The FWC was also satisfied that the employee had been provided procedural fairness, having regard to the Employer’s multiple attempts to meet with the employee to address his performance, the two warnings provided to the employee and the fact that the employee was given several opportunities to improve his performance.
The FWC therefore held that the employee’s dismissal was not harsh, unjust or unreasonable and dismissed the application.
As seen in this decision, a failure to show significant signs of improvement during performance management will not always form a valid reason for dismissal.
When considering dismissals involving underperformance, the FWC will consider factors such as how much time the employee is given to improve, as well as the level of seniority and experience in that role.
It is critical that employers provide underperforming employees with sufficient opportunity to improve their performance before disciplinary action is taken.
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