international employment law firm alliance L&E Global

Australia: Performance Management in the Times of Coronavirus

Authors: Amy Zhang & Angela Zhang

The COVID-19 pandemic has caused a fundamental shift in the way we work. With many employees continuing to work from home for at least the short to medium term in light of the continuing risks of COVID-19 and government restrictions in various parts of Australia, employers need to remain vigilant in respect to their continuing obligations to workers notwithstanding that they are working from home, and must consider the new and unique workplace challenges that arise as a consequence of employees spending many months away from the physical office.

One common workplace challenge is managing performance issues while employees are working remotely.

Where an employee is not performing to the standard required, employers are entitled to implement a performance management process, notwithstanding that employees have been working remotely and may continue to work remotely for some time.

It is, however, important to have regard to any barriers to performance that have arisen as a result of the need to work remotely, and any other mitigating factors caused by the COVID-19 pandemic. For example, has performance output been affected because:

  • of an employee’s reliance on their home internet and computer devices, which may not be as fast or up to date as the office equivalents;
  • of difficulty contacting relevant persons;
  • an employee has had to manage concurrent caring responsibilities; and/or
  • of mental health issues that have been exacerbated by the pandemic (e.g. being isolated from peers and colleagues for many months)?

Failure to have regard to such matters may result in issues for employers down the track, when they seek to rely on such performance issues to justify dismissal.

Where it is or may be necessary to terminate employees who are working remotely, employers should proceed with caution and ensure that procedural fairness continues to be adhered to, to the extent reasonably practicable, to avoid the FWC finding that any dismissal was harsh, unjust or unreasonable due to procedural failures. This includes providing adequate warnings and notice and giving reasonable opportunities to improve performance and respond, as would be the case if an employee was not working remotely. In relation to meetings with concerned employees as part of the performance management and termination process, while this may be a procedural challenge in the context of the pandemic, employers should, to the extent possible, attempt to replicate a  face-to-face environment, such as through videoconferencing facilities, if it is not possible to hold meetings in person.

Case in point

The FWC decision Petersen v Allpet Products [2020] FWC 5332 is illustrative of the importance of the above matters.

In this case, the applicant was a Field Sales Executive who worked remotely, and who had, at all relevant times, met or exceeded her sales targets after joining Allpet Products (“Allpet”). In March 2020, with the onset of COVID-19, an additional reporting obligation was introduced on all sales representatives to submit daily sales reports while having their working hours and wages reduced by 20%. After the applicant failed to complete both the daily sales reports and the pre-existing weekly sales run sheets on various occasions, she was called into a performance meeting at the end of the month, and also received a written warning letter in April 2020. Shortly after this incident, a director visited the applicant’s Instagram account and encountered what they believed to be evidence of a private business conducted by the applicant, potentially in competition with Allpet, alongside disparaging comments about Allpet and personal activities allegedly undertaken on the company’s time. Immediately afterwards, Allpet sent a letter by email dismissing the applicant for failing to perform her duties satisfactorily, including by failing to provide weekly sales run sheets in a timely manner and failing to provide satisfactory representation to clients.

At the FWC hearing, Allpet advanced five further reasons for dismissal not disclosed in the termination letter, including the applicant’s failure to meet other reporting obligations in a timely manner, and its findings on the applicant’s Instagram.

In finding that the dismissal was unfair in this case, the FWC opined that although the applicant’s failure to consistently provide reports was indeed a “performance failure” and warranted formal sanction, either through a fairly conducted performance meeting or a fair written warning, “not all performance failures are a valid reason for dismissal. The seriousness of a performance failure requires a consideration of context and circumstance.”

To that end, the FWC considered that Allpet should have considered the impact of the pandemic on the applicant’s ability to perform her duties, and Allpet should have recognised her “natural anxieties about COVID-19” and “all that COVID-19 could mean for her job security” if the business was severely impacted. In particular, “when COVID-19 hit, the combination of reduced hours to do the job, demotivation arising from reduced hours and pay and an additional reporting obligation combined to create a set of circumstances in which an objective assessment of performance was fraught.” Accordingly, with the sudden changes to working hours, pay and job security, performance issues could not be assessed against pre-pandemic work hours and standard performance criteria.

Similarly, with respect to the applicant’s “failure to provide satisfactory representation to clients,” the FWC held that although her occasional shortcomings in interacting with customers warranted a business response, “a handful of errors scattered across months of otherwise productive work” was also not a valid reason for dismissal, particularly in the unorthodox circumstances brought by COVID-19.

The FWC thus concluded that these circumstances, taken together with the “heavy-handed disciplinary approach” adopted by Allpet, meant there were “material mitigating factors” in assessing the seriousness of the applicant’s failures.

Relevantly, the FWC also considered that Allpet’s reasons for dismissal that were not disclosed in the letter were “based on unfair assumptions and scant evidence,” and that the employer had acted unfairly.

The FWC was also critical of procedural defects around the termination, including a failure to provide an opportunity to address or correct the issues, and terminating the employment without notice by email and without even a call or meeting. In particular, the FWC found that Allpet applied an “unfair disciplinary approach” in holding a spur of the moment performance meeting only a week after its unilateral decision to reduce hours and salary, before providing the applicant with a warning letter only two working days after the performance meeting, which was immediately followed by the applicant’s dismissal. The FWC noted that this sequence of events allowed no adequate opportunity to address the issues raised.

The FWC also held that Allpet’s choice to send the termination letter by email, without speaking to the applicant to discuss its reasons, and even instructing the applicant to read the letter before calling, evidenced a “closed mind and an unwillingness to enter into discussion or correspondence on the issue,” rendering it impossible for the applicant to offer any explanation.

Accordingly, the FWC found that the applicant was denied procedural fairness in respect to her termination. 

Key Action Points for Human Resources and In-house Counsel 

  • The above case shows the importance of employers being mindful of the new challenges arising from the pandemic and longer-term remote work, and to take such challenges into consideration when seeking to implement performance management discussions and disciplinary actions.
  • It also demonstrates the importance of employers continuing to adhere to their statutory and common law obligations in relation to implementing performance management and termination processes, to the extent reasonably practicable in the context of the pandemic. To the extent it is not reasonably practicable to do so, employers should attempt to replicate existing processes as much as possible, while maintaining an overarching focus on ensuring procedural fairness.

If your business requires assistance with managing performance issues, please do not hesitate to contact our team.