Managing underperformance and engaging in performance management processes can be difficult and stressful for both employees and their managers.

It is not uncommon for employees who are required to participate in a performance management process to raise concerns about the impacts of the process on their health (often relating to anxiety or stress). When these issues are raised, employers find themselves in a difficult position – how to press on with managing underperformance without causing any further deterioration to an employee’s health.

In such difficult situations, it is important for employers to carefully consider the health concerns raised by the employee and their effect, if any, on the employee’s capacity for work. For instance, does the employee’s illness or injury prevent them from continuing to participate in the performance management process or from attending work at all? Should any performance management or disciplinary processes be postponed until the employee receives treatment? Is further information required about the employee’s condition?

These questions were considered in Andrew Demosthenous v Jemena Asset Management Pty Ltd [2017] FWC 6945 – an unfair dismissal decision of the Fair Work Commission (FWC) that was recently upheld on appeal to the Full Bench.

In this matter, the FWC heard an application by a Customer Projects Officer who claimed that that his dismissal in June 2017 was unfair. After 19 years of service, the employee was dismissed for poor performance. He claimed that the dismissal was unfair because his employer had failed to postpone or delay its performance management processes, or direct him to take leave, after he told them that he was suffering from several health issues during the performance management process.

The employer had commenced informal performance management in September 2015 and, after seeing no improvement, placed the employee on three consecutive formal Performance Improvement Plans (PIPs). Shortly after the commencement of the second PIP, the employee raised concerns about the timing of the PIP and advised that he was suffering from several health issues including diabetes, extremely low iron levels as well as stress, headaches and insomnia as a result of the PIPs.

At numerous performance review meetings after the employee shared this information, the employer invited the employee to provide more detail about his health issues and repeatedly asked him if there was anything more they could do to assist him to improve his performance. The employer had also encouraged the employee to seek medical advice if he felt it was necessary to do so. The employee’s response was that he was stressed and simply needed to complete the backlog of work in the PIPs before taking a break to relieve the pressure.

By the end of the third PIP, the employee had still not completed the tasks in the PIP (most of which had been outstanding since September 2015) and accordingly, the employer terminated his employment.

The FWC rejected the employee’s arguments that his employer should have directed him to take leave or postponed the performance management process and stated that the employer was under no obligation to do so in circumstances where:

  • the process had been ongoing for almost two years;
  • reasonable inquiries had been made about the employee’s health condition on numerous occasions; and
  • the employee had simply been unwilling to provide the employer with any further detail, including how his health concerns affected his ability to work or participate in the performance management process.

The FWC balanced the employee’s age and length of service against the genuine, lengthy and thorough performance review process and confirmed that termination of his employment was not a disproportionate response. The dismissal was therefore upheld.

The Full Bench later rejected the employee’s application for leave to appeal the decision on the basis that the employee had not been able to establish any arguable case of error. Instead, the Full Bench reiterated the validity of the dismissal, which had been preceded by a lengthy and thorough performance improvement process and included numerous opportunities for the employee to meet the employer’s expectations.

Lessons for employers

It is important that employers approach these situations with caution. A failure to take into consideration an employee’s health concerns during a performance management or disciplinary process may not only place an employee’s health at further risk but can also increase an employer’s exposure to claims under employment, workers compensation, bullying or discrimination laws.

Whilst each case will turn on its own facts, this recent decision from the FWC (as upheld by the Full Bench) has shown support for the position that employers who engage in genuine and thorough processes and make reasonable attempts to take into consideration any health concerns raised by an employee can confidently reduce their exposure to litigation if the employment relationship does eventually come to an end.


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