There comes a time in every business where you are required to performance manage an employee.  However, even though your reasons for taking the action may be valid, if you do not follow a procedural fairness you could be exposing your business to claims risk.  As the saying goes, its what you don’t know that might hurt you.  Today we are going to break down a recent case in the Fair Work Commission where an engineer was awarded a 5 figure settlement for unfair dismissal despite having a valid reason for termination so that you can learn and hopefully avoid the same mistakes.

Of course, if you would like a free consultation and strategic action plan by an experienced HR consultant to help with your own situation, please visit ondemandhr.com.au/advice

Now to the case of Lakhan vs Bestech Group where Lakhan was employed as an engineer.  In January 2021 it was identified that:

• His work was to the standard of his seniority and pay grade;
• His work was slower than expected causing delays in the work of others; and
• He was failing to participate in team meetings

As a result of all this, he was reallocated to less critical projects where his poor performance would have less of a negative impact.  In March of 2021 Mr Lakhan was invited to a meeting to discuss his performance over the past 3 months.  This meeting was informal in nature and did not result in a formal warning.

In May of 2021 there was another meeting with Mr Lakhan which was more formal in nature and he was advised that he would be “performance managed” but again there was no clear setting of expectations of what was required of Mr Lakhan in his position or the potential consequences should his poor performance not improve.

Throughout this entire period through to July 2021 where Mr Lakhan was dismissed, there were several examples of continued poor performance and following the termination, Mr Lakhan was paid in addition to accrued leave 4 weeks pay in lieu of notice and subsequently filed for unfair dismissal relief.

In making their decision the Commission found:

• There was a valid reason for the dismissal, but this is not the only factor when considering if a dismissal was harsh, unjust or unreasonable.
• Notification of the reason for the dismissal should be given prior to a decision regarding termination of employment is made in plain and clear terms. The lack of particulars given to Mr Lakhan resulted in the business failing to provide notification of the valid reason.
• The Commission determined that the decision to dismiss was pre-determined in advance of the dismissal hearing and that the dismissal was procedurally unfair, given Mr Lakhan was not advised of what “performance managed” meant.
• The Commission was neutral regarding matters of allowing a support person. Whilst the employer did not decline any request to have a support person present, given the lack of advance notice of any performance or termination meetings, Mr Lakhan did not have the opportunity to organise a support person or consider having one.
• The Commission determined that whilst Mr Lakhan lacked insight regarding the formality and content of the two meetings held prior to his dismissal taking place, the lack of specific written or oral warnings concerning performance or the consequences of continued underperformance resulted in a finding of unfairness in relation to prior warning of poor performance.
• Given the size of the enterprise (150 employees) the Commission would not mitigate the employer’s procedural shortcomings. The business also had access to a HR Consultant externally.

• The dismissal was found to be harsh and unjust.
• With reinstatement being determined inappropriate, compensation was awarded, and the likely period of employment calculated by the Commission would have been up to 11 weeks based on:
  • Time sufficient for the proposed performance management plan to be developed (accompanied by a formal written warning to the extent Bus Tech saw fit) (notionally one week);
  • Time sufficient for the performance management plan to be implemented and Mr Lakhan’s performance objectively assessed against reasonable benchmarks (including discussion with Mr Lakhan) (notionally eight weeks);
  • Time to assess whether any ongoing performance failure was sufficient to warrant disciplinary warning or dismissal (including discussion with Mr Lakhan) (notionally one week);
  • Time to implement dismissal (if any) in a fair manner (notionally one week).

So what are the key takeaways from this case that businesses should consider?

• Addressing underperformance in a timely manner
• Raising minor issues as they arise rather than awaiting a larger issue to unfold.
• Keeping clear records of meetings and performance discussions.
• Providing clear examples of areas where performance is a concern.
• Considering any external factors that may affect performance during a performance management period.
• Ensuring that performance management processes make clear the risk of continued poor performance
• The importance of providing an opportunity to respond
• Even where there is a valid reason for dismissal, a failure to follow procedural fairness can result in a dismissal being deemed unfair.

That’s it for this case study and as no doubt you can see there is a lot that goes into carrying out a procedurally fair dismissal process even if the reason you are dismissing an employee is fair.  If you are facing a situation in your business and would like to have a free consultation supported by a detailed strategic action plan with one of our experienced HR Consultants, please reach out to us by visiting ondemandhr.com.au/advice

Looking forward to seeing you all in the next update.