Employers need performance reviews: Five reasons and five guidelines

It’s mid February already. If you’re a small to medium business owner you may be finalising your business plan for the year ahead – or perhaps your team has its head down, on the way to achieving its goals for this quarter. Managing your business’ performance effectively entails managing your employees’ performance effectively. An annual performance appraisal is an integral part of this process but should not be the only time that there is feedback between the employer and the employee.

Regular performance reviews enable you to: 

  1. ensure your staff are on track to meet their goals, and therefore your business objectives
  2. identify and address any  issues at the earliest opportunity
  3. assist employees in developing their skills
  4. reduce your risk of exposure to adverse action or unfair dismissal claims.

There’s one more (important) good reason that you may not be aware of: the procedural fairness requirements of the Fair Work Act, 2009, together with more recent decisions of Fair Work Australia (FWA), impose on employers an obligation to act carefully and consistently when managing and disciplining employees.

The following tips provide some practical strategies for effective performance management in the workplace. These may help to minimise the risk of exposure to claims of adverse action or unfair dismissal by disgruntled employees, which can follow on from action taken by the employer to discipline or terminate an employee.

1.     Rigorous performance management

Employers need to constantly audit the performance of their employees to ensure their business is running as effectively as possible. Feedback should be an ongoing task rather than an annual event. A rigorous approach to performance management provides a forum to recognise employee performance and counsel or dismiss an employee for non-performance.

Having a performance management process in place facilitates employers addressing issues and concerns as they arise rather than a retrospective annual consideration of past performance. Addressing and documenting concerns in the workplace as they occur sets expectations for employees and minimises risk exposure to claims in the event of dismissal.

The case of CFMEU v Pilbara Iron Company (Services) Pty Ltd (No. 4) [2012] FCA 894 (August 22, 2012) highlights the importance of the transparency of performance management procedures. This case involved an employee’s contract not being renewed because of complaints made by the employee. The employer was fined $11,000 for changing the worker’s mid-year performance appraisal (including by removing positive comments and lowering his mark from a “pass” in the draft to a “fail” in the final assessment), because he made complaints and inquiries about issues in the workplace.

Justice Katzmann criticised the “absence of transparent procedures …”  which extends to the performance management process of employees.

2.     Consistency when dealing with similar circumstances

Consistency in dealing with employees is important. However it is also important that a distinction is made between consistency in terms of processes, and consistency in outcomes. The circumstances of each matter need to be regarded with reference to their own facts. What is important is that an employer adopts a consistent approach or process in the performance management of its employees. For example, an employee accused of misconduct should expect to be similarly investigated and disciplined in the manner in which a co-worker was investigated and disciplined who had also been accused of misconduct.

A case in point before FWA in February last year is Frank Moretti v HJ Heinz Company Australia Ltd [2012] FWA 1016 (7 February 2012). This case involved an unfair dismissal claim by a sales manager of the company who was dismissed following his refusal to be performance managed because he feared it was designed to trigger his exit from the company. The difficulty the employer had in this case was that it insisted on the employee signing an individual performance management plan, and would not provide him with any details of the performance concerns until the employee signed this performance plan. This was not a common practice in the company and because of this FWA ordered that the employee be re-instated.

Being able to demonstrate that employees have been consistently performance managed will assist in demonstrating effective employee management and will go a long way in defending claims of unfairness or unreasonableness.

3.     Affording the right to a witness or support person

The role of a support person is to provide emotional support for someone being interviewed or disciplined and to act as that person’s witness. Affording the right to a witness or a support person during a counselling or disciplinary meeting may avoid a criticism of unfair conduct on the part of the employer.

In the matter of Bermingham v Kings Transport and Logistics (Aust) Pty Ltd [2010] FWA 1116, whilst the FWA considered the termination of Mr Bermingham justified, the employer was criticised for what was, in effect, a poorly implemented termination.

Mr Bermingham had applied to FWA for relief with respect to the termination of his employment. He argued that his dismissal was unfair due to not being afforded the right to a witness in the termination meeting, and also on the basis of the incorrect description of the fraudulent activity in the termination advice.

Whilst the FWA did not consider a support person as being necessarily required, FWA did comment that “the application of sound defensible and fair human resource management processes mitigates in favour of extending the offer of a support person”.

4.     Adopting a suitable forum for discussion

It is almost trite to say, but adopting a suitable and appropriate forum for a performance discussion to take place is important. Consider the nature of the discussion and whether it is appropriate for such a meeting to be held for example at head office or an allocated meeting room.

5.     Affording the opportunity of a right of reply

In the course of a performance management discussion it is important that an employee is given the opportunity to respond. It is equally important that any such response be properly and fairly considered to minimise a determination that an employer’s conduct was harsh or unreasonable.

In the matter of Bermingham the FWA considered the employer’s termination flawed as it had made the decision to terminate Mr Bermingham’s employment before he was called to the disciplinary meeting. Mr Bermingham was not asked or afforded the opportunity to respond to the specific allegations which the employer may otherwise have put to him and FWA determined the termination unreasonable commenting on the “…substantial inadequacies associated with the investigation and the inequities which this invited”.

 In summary: Having an effective performance management process in place is invariably demanding and it is common for employers to be concerned about the manner and method of dealing with difficult or non-performing employees.

By keeping in mind the above performance management tips, employers will help to minimise the risk of exposure to adverse action and unfair dismissal claims, as such actions find greater momentum under the protections afforded in the Fair Work Act.

 Andrew Bland, Solicitor, BlandsLaw

For more information, please contact us at [email protected]

This article is intended as a guide only and does not replace specific legal advice.


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