What is a performance improvement plan (PIP)?
A Performance Improvement Plan (PIP) is a document that sets out examples of employee behaviour or action that is causing an issue in the workplace and what the employee needs to do to improve it. It may be used to address failures to meet specific job goals or to ameliorate behaviour-related concerns.
A Performance Improvement Plan should be used when there is a commitment to help the employee improve, and should involve a structured approach involving a formal meeting where the employer sets objective outcomes for the employee to achieve over a short period of time (1 to 4 month period). A Performance Improvement Plan should not include steps where an employee’s manager engages in micromanagement.
A Performance Improvement Plan should not be used as a way of pushing an employee out of the workplace (terminating an employee’s employment) or making their ability to perform their role and responsibilities more onerous.
The unreasonable use of a Performance Improvement Plan may amount to workplace bullying. In Federal Circuit Court case of Pezzimenti v Rotary International  FCCA 1854, the Court considered the termination of Mr Pezzimenti after he was placed on a Performance Improvement Plan, he complained of being bullied and was subsequently terminated from employment.
The employer was ordered to pay $205,342 in compensation to Mr Pezzimenti after it placed him on a Performance Improvement Plan because:
- the employer continued to change the outcomes Mr Pezzimenti was required to meet with the Performance Improvement Plan – setting Mr Pezzimenti up to fail;
- the employer looked for additional reasons to terminate Mr Pezzimenti’s employment; and
- the employer failed to call all of the individuals involved in Mr Pezzimenti’s termination to give evidence at trial.
What is workplace bullying?
Workplace bullying can take many different forms and includes psychological, physical or even indirect harm. Some examples of workplace bullying include:
- aggressive and intimidating conduct
- spreading rude and/or inaccurate rumours about an individual, and
- belittling or humiliating comments
- exclusion from work-related events
- unreasonable work expectations
- the making of vexatious allegations against a worker
Bullying involves repeated, unreasonable behaviour that creates a risk to health and safety of a worker (or group of workers) within a workplace. A single instance of unreasonable behaviour towards a worker cannot constitute workplace bullying. In Applicant v General Manager and Company C  FWC 3940 (Company C Case) the Fair Work Commission found that a single incident where the general manager of the employer used an angry and aggressive tone towards the employee did not constitute bullying.
The Commission observed that workplace change is often difficult, and that some workers may find changes to their responsibilities in the workplace very emotionally challenging. Employers must accept the need for reasonable periods of adjustment and the need to support employees through periods of change. The workplace changes in the Company C Case resulted in a breakdown in the relationship between the applicant and the general manager, which subsequently lead to a protracted dispute whereby both parties incurred significant time and financial cost in formal proceedings.
Examples of workplace bullying
In Company C Case, the employee alleged that she had experienced workplace bullying in the form of micromanaging, aggressive behaviour, yelling and the manager dealing directly with the applicant’s team in her absence (encouraging the applicant’s direct reports to undermine her authority).
The Commission did not accept the employee’s submissions, but rather found that:
- it was legitimate for the manager to itemise matters to be reported weekly as part of managing the business unit—this was not considered micromanaging.
- Forceful communication was not bullying when that behaviour was directed at telling the applicant that her own conduct in the meeting was unacceptable.
- The manager did not engage in bullying, when he directly enquired into the absence of one of the applicant’s team members when the applicant was away—this did not undermine the applicant’s authority and was found to be reasonable management action because the manager had overall responsibility for the department.
- Denying a request for a support person in workplace meetings was unreasonable behaviour and not reasonable management action. However, it occurred on one occasion so did not constitute bullying under the Fair Work Act 2009 (FW Act).
Is placing an employee on a PIP considered workplace bullying?
Workplace bullying does not apply to reasonable management action (or omission) carried out in a reasonable manner (see section 789D(2) of the FW Act). Management action involves more than instructions given in the course of routine day-to-day operations. For instance, management actions may include:
- performance appraisals;
- ongoing meetings to address underperformance;
- refusing an employee permission to return to work due to a medical condition; and
- investigating alleged misconduct.
The decision in Blagojevic v AGL Macquarie Pty Ltd; Mitchell Seears  FWC 2906 (Blagojevic Case) considered the term “reasonable management action” and whether it applies to performance management under section 789FD of the FW Act.
The Blagojevic Case involved an application by an employee for an order to stop alleged bullying by his employer. The Applicant contended that the actions of the employer in placing him on a Performance Improvement Plan in March 2017, which was revised in June 2017, constituted bullying in accordance with the FW Act.
The Commission’s view was that there was reasonable justification for the employer to place the applicant on the Performance Improvement Plan. Accordingly, the applicant failed in his application for an order to stop bullying.
The learnings from the Blagojevic Case with respect to what constitutes “reasonable management action” are as follows:
- management actions may be found to reasonable even if it is not executed in accordance with best practices;
- to be considered “reasonable management action”, the action must be lawful and not be “irrational, absurd or ridiculous”;
- any “unreasonableness” must arise from the actual management action, rather than the applicant’s perception of it; and
- consideration may be given as to whether the management action involved a significant departure from established policies or procedures, and if so, whether the departure was reasonable in the circumstances.
Is placing an employee on a PIP considered adverse action?
Placing an employee on a Performance Improvement Plan may give rise to a general protections claim involving adverse action even where an employer had a legitimate basis for placing an employee on a Performance Improvement Plan.
Section 340 of the FW Act prohibits an employer from taking adverse action against an employee because the employee has a workplace right, exercises (or does not exercise) the workplace right, or proposes to exercise (or proposes to not exercise) the workplace right. If an employee exercised a workplace right by making a complaint through the relevant channels, and then was placed on a Performance Improvement Plan, this may lead to a finding that the implementation of the Performance Improvement Plan was adverse action, as was the case in Pezzimenti v Rotary International.
How should you manage underperformance in the workplace?
The Fair Work Ombudsman provides a best practice guide for managing underperformance which employers should be aware of when implementing a Performance Improvement Plan. The best practice steps include:
- Identify the problem
- Assess and analyse
- Meet with the employee
- Agree on a solution
- Monitor and review
Additional tips to assist employers with implementing a PIP include:
- Clearly identifying the specific areas in which the employee’s performance can be improved and articulating these areas with the employee in a meeting.
- Explaining the type of support the employer can offer the employee during their PIP;
- Providing the employee with reasonable time to improve their performance; and
- Explaining clearly to the employee what will happen if their performance does not improve (such as further training, formal warnings and dismissal).
How IR Advocates provides fair workplace support to employers and employees
If you are an employer and have concerns about what steps need to be taken to comply with your employer obligations when performance managing an employee, IR Advocates can help you. It is important to keep comprehensive records of poor performance of employees, areas for improvement, and feedback training to ensure employee performance is handled correctly from start to finish. This protects your business by limiting exposure and reducing costs. For more information call us today on 1300 415 464 or email us.
If you are an employee and are concerned that your workplace rights are being infringed, call us today on 1300 415 464 or email us.