The $205K Performance Improvement Plan!

HR Staff n’ Stuff has supported many clients who have needed to implement Performance Improvement Plans (PIPs).   We always  highlight the need to follow process to protect both your business and the employee.  When used correctly, they can have incredibly positive outcomes but when used inappropriately, they can cost a business an absolute fortune! 

​A recent case proves how costly it can be if you get it wrong.....

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​A Performance Improvement Plan (PIP) is a tool to give an employee with performance shortcomings the opportunity to succeed.  It may be used to address failures to meet specific job goals or to amend and modify poor behaviours that are not acceptable within the workplace.  It’s a fair process that ensures under-performing and poorly behaved staff are given clear instructions and ample opportunity to make changes that will allow them to flourish within a business.  If an employee chooses not to take up this opportunity, a business case can then be made to remove the individual and reduce the chance of an unfair dismissal case hitting your desk.  Sounds simple enough right!

If ever there was a case to prove that process as well as proper use of a PIP is important, the $205k damages awarded to an employee of Rotary International’s South Pacific and Philippines office in Sydney should serve as a warning to all.  

In this case, the aggrieved employee held an executive position and his remuneration level meant that he earnt over the high income threshold, which means he was not eligible to make an unfair dismissal claim. However, the employee alleged that the PIP process was used to bully him, and this allowed for an adverse action (general protections) claim to be lodged. Any employee has the right to lodge an adverse action / general protection claim and unlike an unfair dismissal claim, there is no limit on the monetary cap that courts can award and applicants can claim for pain and suffering. 
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The basic elements of the case are as follows:

• The employee had been in the position with Rotary for over ten years when his employment was terminated partly on the basis of his failure “to meet the standards set down in the PIP within the time frame specified in that plan”. 
• The PIP, sent to the employee by his supervisor, was to occur over a four month period. It set out four objectives: addressing of staff concerns, updating the company’s Employee Handbook and Practice and Procedures, team building, and recognition.
• Six weeks after the introduction of the PIP the employee lodged a bullying complaint about his manager in regards to the manner in which the PIP was being managed.  The employee made it clear that he felt that the PIP was simply a cover for his supervisor’s ultimate goal of terminating his employment.  However, the PIP continued to be overseen by the supervisor.
• At the completion of the four month period the supervisor advised that only one aspect of the PIP had not been met and the employee continued to progress this deliverable.
• Five weeks later the employee and his supervisor met to discuss the outcome of the PIP.   It was at this meeting that the supervisor advised that he was unable to assess the progress on the one deliverable previously not achieved.  He then also advised that the employee had failed to achieve the other three deliverables.  Naturally enough, the meeting ended rather quickly and Rotary suspended the employee’s employment.
• Less than a week later the employee lodged a general protections claim (an employee does not need to have been terminated to lodge this type of claim).  Immediately after this, Rotary looked into the employees leave records, email account and attendance at work.  They also made multiple allegations about his conduct and issued two show cause notices to the employee.  Based on the employee’s non-attendance at a show cause Skype meeting – as well as the allegations and the alleged failure to meet the PIP within the specified timeframe, Rotary terminated the employment of the executive.

In brief, the court found that whilst Rotary had justified concerns about the employee’s performance and that a PIP was appropriate, it was determined that an attitude shift following the bullying complaint occurred and that Rotary “went looking for additional reasons to dismiss” following the application for adverse action. The court also noted that the goalposts of the PIP changed and it was as if the employee was set up to fail.  The court then award 12 months wages as damages amounting to a significant $205k!  

Had Rotary followed a proper process the end result may have been very different – they could have had an employee back on track in terms of performance or they would have evidence proving reasonable grounds to terminate.

Performance Improvement Plans should be seen as a positive and useful mechanism that can allow a business to drive better outcomes for their people.  No one sets out to fail deliberately and there can be valid reasons for poor performance, as simple as confusion about what is required to deliver the required outcomes.  In order to make change, the leader needs to communicate clearly the expectations moving forward and needs to establish what tools the employee will require to make the changes required – is it further training and support, clarity around their actual areas of responsibility, defined goals?  Work out what they need and what can be delivered with the aim of setting the employee up to succeed.    

Fair Work states that a business is not legally obliged to give an employee warning prior to termination however they “should give the employee a chance to fix any performance issues.”  It is fundamentally fair to do so but it could save you and your business a lot of time and money!

Fair Work legislation not only manages claims for wrongful dismissal, but also dictates procedural fairness processes. In addition, with an increase in general protections claims which have no eligibility criteria, it is important for all businesses to understand their obligations in managing employee performance and behaviour appropriately so as to meet your obligations and avoid a claim being made against your business. 

If you require support or guidance with implementing a Performance Improvement Plan, contact the HR Staff n’ Stuff team and we can have a confidential discussion about what is required and how to move forward.

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