As employment lawyers, a regular topic of conversation with clients about implementing and using performance improvement plans (“PIP”) to address an employee’s lagging performance. Our typical guidance is that a PIP can be an excellent tool to identify and rectify an employee’s performance issues. When used properly, a PIP can assist an employee to pull themselves out of a performance tailspin, which benefits both the employer and the employee.
Despite the utility of a PIP, we also regularly see employers use it as code for ‘papering’ a file in order to justify a dismissal for cause. While a PIP can be used to support a dismissal for cause, it can also create significant liability for the employer who implements it with the foregone conclusion of using it to dismiss the employee and not with the goal of improving the employee’s performance. For a PIP to be both effective and not to increase the employer’s liability, it needs to be properly prepared, implemented, and applied.
It is important to always consider that a PIP might someday become a very important part of a lawsuit: Doing everything properly from the outset may save it from winding up as a liability later. This is a difficult, but not impossible task, and can be achieved by following some basic guidelines.
Guidelines and Best Practices for a PIP
Although a PIP is a formal step in the performance management process, it does not need to be the first step. An employer should informally manage employee performance by speaking with them and offering assistance to help address any performance issues.
However, some performance issues may not be capable of being addressed informally, or an employee may not respond to informal attempts to correct their performance. In these instances, the employer can proceed to a PIP step. The PIP should clearly outline:
- employer expectations,
- the employee’s shortfalls,
- available assistance,
- a timeline for improvement, and
- a clear overview of the consequences should the employee fail to meet the employer’s expectations.
Finally, the PIP should include a clear indication from the employer that it will provide the employee with reasonable accommodation upon request. The employee’s lagging performance may be due to factors outside their control, such as an undisclosed medical condition. The employee should be advised that the employer will provide them with the reasonable accommodation necessary to do their job. Failing to do so on the part of the employer may not only result in unnecessarily dismissing an employee but also breaching the employee’s human rights, which is actionable.
Applying the PIP
Employee Sign Off
Every step of the PIP should be documented with employee sign off or the opportunity to do so. If the employee refuses to sign, the employer can indicate on the relevant paperwork that the employee was provided with a copy of the documentation and given an opportunity to sign, which the employee refused. All documentation should be included in the employee’s file.
Employer Assistance
The employer must make sure it works to assist the employee to improve their performance. It cannot do anything which would not assist the employee or that could hinder the employee. If the employee fails to improve, it cannot be due to action or inaction on the part of the employer. This is vital if the employer wants to rely on the employee’s ongoing performance issues as a basis to dismiss the employee for cause.
Employer Follow Through With Consequences
If the employee’s performance remains problematic, the employer must follow through with the consequences outlined in the PIP for failure. The employer may not simply wave off the employee’s failure to improve and allow the employee to continue working. There are both practical and legal impacts from doing so.
Practically, if the employer doesn’t follow through, other employees will not take the PIP process seriously, and it will weaken its effectiveness as a management tool.
Legally, failure to follow through means that the employer has accepted the employee’s poor performance and allowed them to continue working. This is called condonation and it means the employer may not be able to rely on the outcome of the PIP to dismiss the employee in future.
Note that a failed PIP does not automatically mean that the employee can be dismissed for cause; or even that the employer should dismiss the employee for cause. Like most things in employment law, the answer is going to be “it depends”, and a decision to dismiss the employee, particularly if a dismissal for cause is being considered, should be made after consultation with an employment lawyer.
Takeaways
A PIP can be a powerful tool in an employer’s arsenal. Used properly, and depending on the outcome, it can either assist an employee to improve their performance, or it may provide a basis to dismiss the employee for cause.
Before choosing to proceed with a PIP, an employer should consider their motivation in establishing and operating the PIP. If the purpose is to build towards a dismissal for cause to avoid severance costs, the employer must consider the factors set out above (including the potential for an award of damages of bad faith) and go into the process with the understanding that this may result.
A further consideration is the expediency of the process. A failed PIP is not a guarantee that a court will uphold a decision to dismiss for cause. If the employer has already decided to dismiss the employee, irrespective of the outcome of the PIP, it may be a better decision to dismiss the employee without cause and save the employer the risk of a for cause dismissal holding up, and the cost of the PIP process.
The main detail is to ensure that the PIP is:
- entered into in good faith,
- properly drafted, and
- each step of the process is carried out correctly.
Not doing so can expose the employer to liability and at the same time, weaken the effectiveness of the PIP. Ultimately, it comes down to the basic adage that if something is worth doing, it is worth doing correctly. We assist both employers and employees in all aspects of the employment relationship, and would be happy to assist you whether you are an employee whose employment has been terminated, or an employer contemplating dismissing an employee for cause. Feel free to check out our FAQs and contact us for advice tailored to your situation.
