Up to the job?

With the repeal of the default retirement age (“DRA”) has come a realisation that employers will have to be better at managing performance and capability issues, or else risk being on the wrong end of unfair dismissal, age and disability discrimination claims.

The DRA often provided a useful get-out for employers whose performance management systems were less than robust. But, as the vast majority of employers now seem to be operating without a retirement age, increasing reliance will need to be placed on capability as a potentially fair reason for dismissal.

Whatever the reasons for poor performance, employers must have a means of tackling it. If your processes are properly considered and drafted, they are more likely to catch a slide in performance before it becomes a real issue, and bring about the improvements you desire.

Areas of risk

Capability is a potentially fair reason for dismissal. To avoid potential unfair dismissal claims, an employer must not only get the procedure correct, but be able to show that capability is the actual reason for dismissal. The relevant case law is quite old, with cases from the 70s and 80s still setting out the standards required of an employer in establishing a capability dismissal and handling it properly.

Discrimination claims are the other main area of risk if an employer manages capability incorrectly, or tries to use it as an excuse to mask other reasons for dismissal. Given the potential for an uncapped discrimination award this can be a costly error.

It will always be necessary, when contemplating a capability dismissal, to establish at an early stage whether the problem is that the individual knows perfectly well what is required of them, and is simply negligent or consciously ignoring instructions. This may, in effect, mean that the problem is one of conduct rather than capability and should be treated as such. Is the issue that the person “can’t” or “won’t” do the job?

Reasonable requirements

If it is clearly a potential capability dismissal, there are two questions a tribunal will expect an employer to be able to answer. First, did they honestly believe that the employee was incompetent or unsuitable for the job? Secondly, were the grounds for that belief reasonable?

In answering both, an employer will ideally want to be able to point to objective evidence. This will first of all help ensure the fairness of any action taken in the eyes of the employee, perhaps meaning they are less likely to challenge the decision or to see it as discriminatory. Just as importantly, this evidence will also be required to back up the assertions as to lack of capability.

Considering whether the grounds for belief in an individual’s incompetence are reasonable, an employer will need to convince the tribunal that the requirements of the job were reasonable. The tribunal will take into account all the surrounding circumstances. For example, in a fee-earning environment, whether the fee targets were realistic; the reasons for the employee not attaining the target; how other fee earners fared; and the employee’s length of service.

Managing performance

The Acas Code of Practice on Disciplinary and Grievance Procedures states: “Disciplinary situations include misconduct and/or poor performance. If employers have a separate capability procedure, they may prefer to address performance issues under this procedure. If so, however, the basic principles of fairness set out in this Code should still be followed, albeit that they may need to be adapted”.

The code should always be borne in mind when dismissing an employee; however, switching from capability procedure to disciplinary procedure without good reason may be unwise.

It is essential that a system of warnings (informal and formal) is used to bring individuals up to the standards of performance required. This assumes that there are explicit standards and that these have been communicated to employees. Standards can be communicated in many ways, for example induction training; employee handbook; supervision; individual job descriptions; appraisal system, etc.

If introducing a performance management regime for the first time, an employer should aim to pilot it first, with a view to implementing it at the start of the financial/staff reporting year, allowing sufficient time for training and communication in advance. It is not a good idea for anyone involved to wait until there is a problem before commencing discussions about performance. Nor should it simply be an annual event. Performance should be managed through regular discussions which don’t just focus on the negatives, but also consider achievements, successes, and career plans and aspirations. Line managers need training on what is expected of them in operating a performance management procedure.

In summary, employers need to have an objective measure of their employees’ capability to do their job – whatever their ages.