How performance reviews can protect you from unfair dismissal claims

For a little over three years many businesses who wanted to dismiss employees have not really had to give a second thought to unfair dismissal rules. All of that changes on 1 July with the commencement of the Fair Work Act.

It also comes in the middle of performance review season. Here are some of the common issues employers will have to think about in the changing environment.

I have 100 employee or less – I have been exempt from unfair dismissal laws

Not any more! All employers must now take steps to avoid being found to have unfairly dismissed an employee. Don’t forget, you still have unlawful termination issues to consider as well.

The basics of avoiding an unfair dismissal claim haven’t changed fundamentally, but the new legislation sets them out:

• Make sure you have a valid reason for terminating the employee’s employment.
• You must notify the employee of the reason for termination of their employment.
• The employee must be given an opportunity to respond to allegations of poor performance or conduct.
• An employer must not unreasonable refuse the employee an opportunity to have a ‘support person’ present at any discussions about performance or conduct.
• The employee must have received previous warnings about unsatisfactory performance.

I have less than 15 employees. Aren’t I exempt under the new rules?

Not really. You still have to observe the rules but they are a little more relaxed for small businesses with less than 15 employees. There are some subtleties about how the 15 are counted, but in basic terms if you can show that you have followed the Government’s Fair Dismissal Code – a kind of unfair dismissal lite regime – the dismissal will be deemed to be “fair” and a claim against you can’t proceed. The government has even provided a checklist to help ensure you’ve followed all the steps. Whether or not your business has complied will be determined by a Fair Work Australia officer.

Our business is starting the process of staff performance reviews – do I need to do anything?

Think about the future. That employee you love so much today who has a few rough edges, might not make the grade. In a land where unfair dismissal claims are something you haven’t thought about for a while, the classic employer risk is to have a draw full of glowing performance reviews, or even worse, no performance reviews, followed by a series of unexplained pay rises – though the latter may not be such an issue in 2009.

When you are setting up your performance reviews for this year, make sure you have documentation which has space for identifying an employee’s strengths and their weaknesses. No employee is perfect and it is possible to have that discussion without it being awkward. You should also ensure that that you include space for recommending what measures the employee needs to take in the run up to the next review to address those weaknesses.

Get the employee to sign off on the assessment, which will be a lot easier to do now than later, when everyone is under pressure.

While you are on a roll, think about it in these terms: could the employee’s weaknesses become a real long term problem, and might they one day just cause you to have second thoughts about their place in your expanding, high performance business?

Just about every business has employees who are ‘the forgotten people’. They are allowed to do their job year-on-year without being managed or coached, or without their weaknesses being identified. Overnight they become a problem employee who is indignant about being hauled up about their performance, and management wonders why. So make sure that everyone in the organisation gets a performance review every year.

Remember, the performance assessment is not a warning. While it may be influential in showing that you have given an unsatisfactory employee a ‘fair go all round’, you must still ensure that you have a process for dealing with underperforming or poorly behaved employees.

Paperwork can be your best friend

Finally, all this talk of documentation may sound intimidating; many of you reading this will be thinking “I don’t have the time to create all this meaningless paperwork”. The unfortunate fact is that when the going gets tough, paperwork done properly can be your best friend. Done poorly or without thought, it can be your worst enemy. Not doing it at all is setting yourself up for a very one-sided contest.

The best bit is, the paperwork doesn’t have to be complex. You don’t need a range of 1000 performance metrics devised by the HR guru at a world leading university business school. You don’t need to engage a team of psychologists to deal with the inner failings of poorly performing employees.

Think about what you need your employees to do. Think about what they do well and not so well. Tell them what you think and how they can improve. Write it all down and keep a record. Consider each individual’s circumstances when things get tough and see if you can help. If you can’t and they just aren’t doing their job properly, the preparation will be well worth it.