As a manager or human resources professional in the retail or quick service sectors, managing employee performance can easily fall by the wayside amongst the hustle and bustle of day-to-day operations.

In many cases, poor performance will fester because employees have not been made aware of their poor performance issues, and because their managers:

  • don’t act promptly and skirt around key performance issues;
  • are afraid of confrontation and dislike engaging in uncomfortable conversations; and/or
  • are simply too busy to address the problems.

However, businesses that fail to take adequate and swift action when performance issues arise are likely to face operational issues, economic impacts, employee disengagement, and most importantly, legal proceedings upon termination (e.g., unfair dismissal claim).

What happens when performance management is prioritised?

As foreshadowed above, where you dismiss an employee and can demonstrate that you have prioritised a structured performance management process, you will be better placed to defend an unfair dismissal claim. Relevantly, section 387 of the Fair Work Act 2009  (Cth) outlines the key elements the Fair Work Commission (Commission) will consider when determining if a dismissal was harsh. Specifically, the Commission will consider:

  • whether there was a valid reason for dismissal;
  • whether the employee was notified of that reason;
  • whether the employee had an opportunity to respond;
  • whether the person had been warned about unsatisfactory performance before the dismissal;
  • the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal;
  • the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
  • any unreasonable refusal of a support person; and
  • any other matters the Commission considers relevant.

In the case of Frederikus Hogendorn v Nokia Solutions and Network T/A Nokia [2020] FWC 4476, the Commission upheld the dismissal of an employee for underperformance and commended the employer for following a thorough performance management process.

During his employment, Mr Hogendorn was issued with a written warning for performance issues and was later placed on a performance improvement plan by the employer. However, despite the support provided by the employer, Mr Hogendorn failed to meet the requirements of the performance improvement plan and was eventually terminated.

Importantly, Commissioner Hunt considered the following elements in concluding that the dismissal was not harsh, unjust, or unreasonable:

  • the significant period of time of time the employer gave Mr Hogendorn to improve his performance;
  • the multiple warnings the employer had issued to Mr Hogendorn; and
  • Mr Hogendorn’s failure to improve his performance, despite the employer implementing a performance improvement plan.

In this case, the employee’s application for unfair dismissal was dismissed by the Commission.

What happens if I don’t prioritise performance management?

Consider the below scenario:

“I’ve had performance concerns with my employee for months! Sam’s been here well over a year, and he should know what to do by now. We’ve had some informal chats, but nothing formal or documented…I’m at my last straw and I want to terminate his employment today.”

All too often, businesses let employee performance concerns carry on for months before abruptly deciding to terminate their employment when they’ve had enough, without documented evidence to support the dismissal. Assuming the employee has met the minimum employment period, proceeding to terminate an employee for performance issues without having followed a structured performance management process will leave the business open to the risk of a successful unfair dismissal claim.

This was highlighted in the case of John Robert Dean v Sybecca Pty Ltd T/A Sleepy Lagoon Hotel [2010] FWA 8462. Here, the employee, a Hotel Manager at Sleepy Lagoon Hotel, filed an unfair dismissal claim against his employer upon receiving confirmation of termination for unsatisfactory performance. In his application, the Hotel Manager submitted that he never received counselling or warnings about his performance during his tenure.

In its defence, the employer argued that the Hotel Manager ought to have been aware of the business’s goals and expectations based on intermittent comments made by the employer to the Hotel Manager. The employer acknowledged not engaging in direct performance management but tried to argue that interactions with managers and staff, where the expectation of hard work and diligence was emphasised, was evidence of warning the employee about his poor performance.

The Commission concluded that, albeit the employer presumed that the Hotel Manager understood the expectations placed upon him, the employer’s actions did not constitute a formal warning or provide an opportunity for the employee to improve his performance. Further, the Commission found that the employee was never expressly warned that his employment was in jeopardy.

Despite being a small business without human resources expertise, the Commission held that the employer should have communicated with the employee about their concerns and provided an opportunity for improvement, ultimately determining the dismissal to be unfair.

Key takeaways

  1. When performance issues arise, address those concerns immediately with the employee through open and transparent communication.
  2. Utilise tools such as performance improvement plans and document all conversations about performance, whether informal or formal, and keep records of any written warnings issued to the employee. Such evidence can be used to the businesses advantage, should you be required to defend an unfair dismissal claim.
  3. Ensure any performance management process that you implement complies with the rules of procedural fairness.

Want to know more?

If you want to learn more about the performance management process, or simply sharpen your existing knowledge and understanding, come along to our ‘Performance Management for Retail Leaders’ webinar, on 31 August 2023 at 9.00am -11.00am (AEST).

Presented by Lindsay Carroll (Legal Practice Director) and Remy Atkinson (Lawyer), you’ll learn how to effectively communicate as a leader, deliver constructive feedback, effectively set performance goals, conduct performance evaluations, and handle performance-related issues in a fair and compliant manner. Tickets are $200 plus GST and you can register here.

Alternatively, please contact our Workplace Relations team via the National Retail Association’s hotline on 1800 RETAIL (1800 738 245).