'The point of a PIP is to give clear guidance,' says Sydney lawyer
Recently, the Fair Work Commission (FWC) dealt with a case involving allegations of constructive dismissal and adverse action in the healthcare sector.
The dispute centred around a clinical support nurse who resigned after being placed on a performance improvement plan (PIP).
As part of her case, she argued that the PIP was a form of adverse action in response to her exercising workplace rights, specifically her complaints about workplace safety, bullying, and inadequate training
But the organisation argued that the PIP was intended to improve performance, not end employment, and the FWC sided in favour of the employer.
When it comes to PIPs, there are a variety of employment law considerations for HR.
“The unfair dismissal claim is the most common scenario,” Amy Zhang, executive counsel and team leader at Harmers Workplace Lawyers in Sydney, explained.
“There could also potentially be a breach of contract claim or a general protection claim. The employee could potentially claim discriminatory reasons behind the PIP. If the PIP process was done in a procedurally unfair way, that could lead to compensation to the employee even if there was reason for the PIP in the first place.”
Communication key to setting up PIP
There are some important steps that employers should keep in mind when working with PIPs.
“The point of a PIP is to give clear guidance,” Zhang said. “The communication should always be carefully thought out. It should be clear both in terms of how the PIP is designed to improve the employee’s performance, but also clearly raise what are the potential consequences if the objectives are not achieved.”
Being clear about the purpose of the PIP is paramount. The employer should make sure that the PIP is reasonable and measured and designed to improve performance, rather than designed for failure.
“It is important to provide an opportunity for a support person in any meeting where you are discussing the PIP. Potentially offer support, counseling, EAP services,” Zhang said. “It’s also fundamental to provide as much information as possible about the PIP process. What is required, what are the KPIs, what supportive training would be provided, what is the review period.”
Timing important with performance improvement plans
PIPs should always come after genuine performance concerns are noted and communicated and should provide a reasonable opportunity for improvement, Andrew Jewell, principal at Jewell Hancock Employment Lawyers in Melbourne, said.
“Employers should be careful to avoid the impression that a PIP is being used for an improper purpose such as punishing an employee for other tension or non-performance related events.”
And employers should never be afraid to address underperformance, although finding the correct timing might be vital to avoid consequences, Zhang said.
“If there is a very tense situation within the workplace, or if the employee is very emotional, or the health of the employee is impacted, it might be appropriate to wait a short amount of time and wait for a better moment to raise these issues,” she said.
“But you cannot wait forever. You have to assess the best time to do it.”
When PIPs lead to ‘resignations’
Sometimes, employees resign in the heat of the moment after being put on a performance improvement plan, so handling this the right way is crucial.
“It’s always good to wait a reasonable amount of time after a heated resignation before reaching out to the employee to confirm in writing their decision,” Zhang said. “Sometimes it could be a day or two. There have been a couple of cases in which the FWC has been very critical of employers who have just accepted resignation in the heat of the moment without doing anything.”
It’s also important to have a clear paper trail in defending these claims, so HR’s assistance in following processes can be very valuable, Jewell added.
“If the employee seeks to rescind the resignation, as can be the case with ‘heat of the moment’ resignations, the employer should consider whether it is willing to allow the employee to return to work.”
How the FWC handles PIP-related casees
It is important to keep in mind what the FWC would look for in a PIP-related case.
“The commission will look at the lead-up to the circumstances and if there was a genuine need for the PIP first,” Zhang said. “They will look at the communication and the language that was used, whether the PIP was fair, clear, measured, and reasonable, and not designed for the employee to fail, which could lead to a constructive dismissal situation.”
The PIP also should be achievable and aligned with what the performance concern is. If the performance issue requires time to show improvement, the review period must be reasonable, she said.
“It could be a month, a few months, depending on the circumstances,” Zhang said. “It’s always good to give more time than less to allow the employee to be fairly assessed and give them a chance to improve.”
