Dear hrlaw auntie,
I am an owner of a small business and only have about 10 employees working in the office. Unfortunately, one of these employees (who has been employed in my business for over a year) has been underperforming recently: he is getting in late, missing deadlines, failing to listen to criticism and producing unacceptable work. I have received a complaint from one of my major clients about his behaviour and I am worried that it is affecting my business’ reputation in the market. I am also worried that if it continues much longer that morale in the office will drop and other employees will start to behave in a similar way. I can’t afford to let this happen as my business is small and relies on the good reputation which it has built up. I have looked at the employee’s contract of employment. I have to give him a month’s notice but the clause says that I can pay him instead of making him work his notice. It also it states that under the contract I have to follow a performance management process. It looks to me that this process could take up to 8 weeks to complete, once I have given him time to improve, issued warnings etc whereas my aim is to dismiss this troublesome employee as fast as possible. I remember reading on Hrlaw that there are now minimum disciplinary procedures that an employer has to follow but is there any way that I can dismiss this employee without following the full performance process?
Concerned about underperformance
It sounds like you are in a tricky situation and want to act quickly to stop this kind of behaviour affecting your business. However, you are right that there are minimum procedures which you should follow otherwise you could find yourself faced with an employment tribunal claim from a disgruntled employee. And that is not good for morale either!
There are various options available to think about which I will outline below. It really depends on what your business priorities are and only you can decide that!
Wrongful dismissal claim
If you terminate this troublesome employee’s contract without serving him with his minimum notice period under his contract (or his statutory minimum notice period), you will be acting in breach of contract. However, you could offer to pay him in lieu of his notice period so that he won’t actually be in the office causing disruption. As his contract of employment provides for his being paid in lieu of notice, then you won’t be acting in breach of his contract by doing this.
You have indicated that the performance process is contractually binding, so if you fail to put your troublesome employee through the poor performance/capability procedure before terminating his employment, you will be acting in breach of contract. It would be open to your troublesome employee to argue that it could take up to 8 weeks to put him through the formal performance management process and as you failed to follow this procedure, he would have been entitled to work for a further 8 weeks and on this basis, the Tribunal could award up to a further 8 weeks’ remuneration.
Statutory rights – unfair dismissal
Your employee has over a year’s service so is entitled to claim unfair dismissal. He would have three months less a day from the date of termination in which to bring such a claim.
In order to terminate your employee’s employment lawfully, you have to have a potentially fair statutory reason and have to follow a fair procedure in doing so. Capability/performance is a potentially fair statutory reason for terminating your employee’s employment. However, prior to dismissing your troublesome employee, in order to be fair, you should follow the performance management process as outlined in his contract of employment. The employee in question would need to be given sufficient time to try to improve his performance. Putting the employee through the full process is obviously the safest approach in order to avoid you being at risk of an unfair dismissal claim; if you were to dismiss the employee after putting him through the full process, a tribunal is more likely to find that the dismissal is fair. However, you may not want to hear this advice if you want to dismiss the troublesome employee straight away!
Another option is that you don’t follow the full performance process as it will be too time consuming and damaging to your business. We would recommend, however, that you follow the basic statutory minimum procedures. As you are aware the new statutory disciplinary and dismissal procedures came into force on 1 October 2004. As a result, it is now automatically unfair to dismiss your employee without following the statutory disciplinary and dismissal procedures and failure to follow the statutory procedures means that the Employment Tribunal can uplift the amount of compensation awarded to your troublesome employee by between 10-50% (subject to the cap of £56,800). The standard procedure is fairly basic and could be completed quickly if necessary:
1. Write to your employee notifying them of their instances of poor performance and the basis for concluding that he has been under-performing and invite him to a meeting to discuss the matter;
2. Hold a meeting to discuss the poor performance at which your employee has the right to be accompanied by a colleague or trade union representative of his choice and notify your employee of the decision;
3. If your employee wishes to appeal, hold an appeal meeting at which he has the right to be accompanied, and inform him of the final decision.
The benefit is that the dismissal will not be automatically unfair and there will not be any uplift in compensation. However, it could still be an unfair dismissal and the general tests of reasonableness will apply. The Tribunal will particularly look at your failure to follow your contractual procedures setting out the full performance management process. Any compensation which your troublesome employee is awarded will be subject to the statutory cap £56,800. Although, your employee would be expected to mitigate his losses.
If you really don’t want to put your employee through any procedures, another alternative is that you have a without prejudice conversation with your employee in which you put forward an offer to settle any potential claims. You should pitch the amount offered at a sensible amount that you think the employee will accept. How much you offer all depends on how quickly you want this matter resolved and can afford to pay. The term “without prejudice” means that any such conversation with your employee should not be disclosable to an employment tribunal, should it not be possible to settle this claim. However, there is always a risk with any without prejudice conversation that it will subsequently be disclosable if it is found that it was not a genuine attempt to compromise a dispute. To avoid this, you would be advised to raise your concerns about your troublesome employee’s performance before having a formal without prejudice conversation. You should ensure that your employee signs up to a compromise agreement in which he waives all potential claims against your business. Should you be unable to reach settlement with him, it would still be advisable to follow the statutory disciplinary procedures to avoid a claim for automatic unfair dismissal.