Performance Issues vs Misconduct - Employment Lawyer – Business Lawyer - Dukesons Business Law

March 2019

This Blog isn't legal advice – if you need legal advice on any employment law issue or any other business law or commercial law issue, please contact me. I'm a business lawyer (commercial lawyer) who provides advice on a wide range of business law or commercial law issues including employment law issues.

Recent case illustrates confusion between performance issues and misconduct

In a recent case (McKenna v New Zealand Automobile Association), an employee was alleged to have made a number of processing errors. The employer viewed this as misconduct and ultimately terminated the employee’s employment on the basis of serious misconduct.

Leaving aside the issue that the employer’s disciplinary procedure was defective, even if there had been misconduct, the trouble was that the employer had confused performance issues with misconduct. The employee had simply made errors.

It’s true that in cases of serious negligence, conduct may amount to serious misconduct. But generally, if someone performs less than satisfactorily, this is a performance issue, not misconduct. The remedy is to follow an appropriate performance management process.

Personally, I don’t think that it’s helpful to analyse performance in the context of warnings, at least, not in the same sense as warnings are used in a disciplinary context (where misconduct is the issue). The ERA stated in the present case that ongoing performance issues could be treated as serious misconduct but really, poor performance always remains poor performance – how can it become misconduct?

In my view, it’s better to treat performance as always being a performance issue and in that regard, to acknowledge that there will be a point where once the employee had been given every opportunity, their employment may need to be terminated. Prior to that, it would be best that the employee has been made aware that their employment may be terminated if their performance doesn’t improve with in a stated time frame. You can say that this is a warning, which it is in a sense, but whatever you call it, you are fairly informing the employee that to retain their position, their performance needs to improve.

It won’t be fatal if you use disciplinary concepts to deal with the issue but in my view, clearer thinking will be likely if you regard performance issues as being performance issues and not misconduct.

The point of the case is that you need to know when a performance issue is involved and when misconduct is involved. The former is about performance management, whereas the latter is about an employee not repeating misconduct.

Getting it wrong can be costly

An employee can claim compensation for distress caused by disadvantage caused to them by the unjustified actions of the employer. For example, where termination is completely unjustified or, thought there's good reason to terminate, the employer has followed a flawed procedure. My guess is that an average award for such compensation is probably in the $15000-20000 range at present, with the potential to be significantly higher in serious cases. Then there's the question of the right to recover lost income where termination is unjustified, including substantively i.e. where there's no good reason to terminate.

When it’s borne in mind that reinstatement must be ordered if practical, it pays to get things right (or as right as possible, given that there are grey areas from time to time).


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