A key element of effective workforce management and organizational success is to address employee performance issues in a timely manner.  This can be achieved through the proper use of Performance Improvement Plans (“PIPs”).  PIPs are often misunderstood with costly consequences for employers.   A common misunderstanding, both for employers and employees, is to consider a PIP as a precursor to termination for cause.  Understood this way, employees experience great stress and anxiety, sometimes resulting in extended sick leaves.

The employer’s message should clearly convey that the PIP is intended to assist the employee in improving identified performance issues and encouraging the employee’s growth. If the employer is not going to implement a PIP in good faith, a better option is to consider a termination without cause.

A PIP is not a cover-up for termination or disciplinary action. It is also not just another performance review.  As shown below, misusing PIPs can have serious and costly consequences.

Risks of misusing PIPS

Risk of Moral Damages Claims

In Piresferreira v. Ayotte, 2010 ONCA 384, misuse of PIPs resulted in the award of an additional $45,000 against the employer, Bell Mobility, for mental suffering of the employee. This employee’s supervisor, known for his aggressive behaviour, became verbally abusive towards her, and then pushed and shoved her when she did not perform as he wanted. He then strategically timed the delivery of a PIP to thwart any potential complaints against him. Further, even after Bell Mobility became aware of the manager’s conduct, it failed to take appropriate action.

A PIP must be implemented in good faith and fairly. As this case illustrates, implementing a PIP in bad faith can lead to moral damages against the employer.

Risk of Human Rights Claims

An employee in Ontario filed an application against her former employer with the Human Rights Tribunal Ontario. She claimed she was discriminated against based on sex, age, marital status, race, place of origin, and disability, and faced reprisal, which goes against the Human Rights Code.

The conflict started in June 2018 when one manager wanted to terminate her, while another manager and the Human Resources representative disagreed and offered her a PIP instead.

During the hearing, the employee argued that the PIP was created to cover up racial discrimination within the company and was a setup for her dismissal. An email from one of her managers seemed to support this claim.

Although the employee’s human rights claim was not successful, the process had a negative impact on the company’s public image and cost the employer time and resources to prove that the PIP was not just an excuse for termination or a way to cover up discrimination.

Risk of Occupational Health and Safety Claims

In British Columbia, a flight attendant filed for compensation for a mental disorder allegedly caused by traumatic or work-related stressors. He listed various factors that contributed to his distress, one of which was being placed on a PIP. This case was reviewed by BC’s Workers’ Compensation Appeal Tribunal (“WCAT”).

Although ultimately unsuccessful because the flight attendant failed to prove that he developed a compensable mental disorder, this case serves as another cautionary tale for employers to properly implement PIPs. WCAT stated that all workers experience “normal pressures and tensions” in the workplace related to their duties and interpersonal relations. However, if an employee can show that the pressure they faced exceeded normal levels, it could potentially change the outcome of their claim.

Proof that an employee faced excessive pressure resulting in a compensable mental disorder might point to a breach of the employer’s duty to ensure a safe work environment. That employee might also have grounds for a successful compensation claim.

Understanding PIPS

A PIP is intended to guide and support employees in enhancing their performance, bridging any gaps through collaboration and mutual respect. It focuses on empowering individuals for increased productivity and morale in the workplace, rather than serving as a punitive measure or a pretext for termination. Here are key points to remember:

• Not a Cover-up for Termination: PIPs aim to support and guide, not punish or create grounds for dismissal.
• Not Punishment or Discipline: Employers can create a positive and supportive work environment conducive to growth and improvement by reframing PIPs as constructive tools for development rather than disciplinary measures.
• Not Just Another Performance Review: Instead of treating PIPs as one-way communication or a regular review of an employee’s performance, employers should view them as opportunities for meaningful engagement and problem-solving.

Tips on Implementing PIPs

A PIP serves as a strategic framework designed to enhance employee performance through detailed requirements and constructive dialogue. When implementing a PIP, employers should consider:

• Setting specific requirements: Detail areas that need improvement, establish achievable and measurable goals, outline available support, and set a clear timeline.
• Harnessing the power of feedback: Facilitate a two-way conversation, schedule regular check-ins for progress assessment, and foster continuous learning through the exchange of feedback.
• Responding properly to employee dissents: Keep open channels for employees to express their concerns in writing, address their feedback constructively, and adjust the PIP based on employee perspectives when necessary.
• Carefully managing termination: Ultimately, even the best-faith efforts to assist an employee in improving their performance may fail. If that is the case, termination may become an option. While PIPs may precede termination, employers should consider it a last resort and proceed with caution and fairness, ensuring the process is perceived as transparent and just.

It is crucial for employers to ensure that PIPs are implemented with genuine intent to assist employee development, not as a pretext for termination. Such an approach not only helps in avoiding legal repercussions but also contributes to a positive and productive work environment.