Terminating employment due to poor performance or serious misconduct is an area of law fraught with litigation risk. Every employer should therefore have basic processes and procedures to manage poor performance in the workplace. These processes and procedures are usually set out in a Human Resources Policy which includes transparent processes to dismiss and discipline employees.

Given the high risk that an employee terminated for poor performance will challenge the decision, it is very important that the entire process is well documented by the employer. This documentation can be used by the employer as evidence should litigation ensue.

What constitutes poor performance

In Australia, underperformance (or as it is commonly referred to, poor performance) can take the form of unsatisfactory work performance, non-compliance with workplace policies, or unacceptable, disruptive or negative behaviour.

Underperformance is not to be confused with misconduct. Misconduct is regarded as seriously “bad” behaviour such as theft or assault and often warrants immediate dismissal.

Relevance of unfair dismissal

When considering whether to terminate the employment of an employee, it is important to be aware of the laws relating to unfair dismissal and unfair termination to ensure that the termination will not fall foul of these laws.

For example, where an employee has the right to challenge the termination under the Fair Work Act 2009 (Cth), the employee can allege, amongst other things, that the termination was unfair due to inadequate provision of warnings, insufficient opportunities to respond to warnings or to improve behaviour, or that there was no valid reason for termination.

When using this precedent

It is a myth that an employer must give an employee three warnings before dismissal for poor performance. Each circumstance is different and the number of warnings to be provided will depend on the nature of underperformance and the attempts made by both the employer and employee to address it.

In the case of an employee who has committed gross or serious misconduct, no formal warnings are required before dismissal. See the separate precedent letter terminating an employee without notice for serious misconduct.

It is important that a formal warning letter specify clearly the reason for the warning, details of underperformance and the steps to be taken by the employee to improve the performance.