Difficult employees sometimes present a unique challenge for employers. This is particularly true when an employee’s conduct warrants intervention but the company is unsure whether it meets the threshold for “just cause” termination. If the employee has many years of service or is governed by an outdated or nonexistent written contract, a termination without cause can lead to substantial – and costly – common-law notice liabilities.

In these circumstances, some employers may consider implementing a Performance Improvement Plan (“PIP”) and introducing a new employment contract with enforceable termination provisions. The logic behind that is clear: if the employee improves, the employer will fix performance issues; if the employee fails, the employer can terminate them under the new, less costly terms. While this may be seen as a strong management strategy, there is a higher risk of bad faith claims.

Tips for PIP Implementation

If a PIP is implemented with the hidden primary goal of forcing an employee out or pressuring them to sign a more restrictive contract, the employer risks a claim for bad faith or aggravated damages. If an employer uses a PIP as a “cover-up” to build a case for a termination they’ve already decided on, the courts will see through it.

A PIP is only a shield if it is authentic. Courts look for “good faith” dealings in the employment relationship. The PIP must stand on its own as a genuine opportunity for the employee to keep their job. This means the PIP must provide clear, achievable goals, along with the actual support or resources needed to meet them.

Below are some implementation tips for employers:

• Objective Criteria: The plan should identify specific, measurable areas for improvement. Vague references to “attitude” are difficult to defend; instead, the employer should cite documented instances of missed deadlines, specific behavioural incidents, and/or objective output metrics.
• Provision of Support: A PIP is more likely to be viewed as a good-faith effort if it includes a commitment of resources, such as additional training, mentorship, or adjusted workloads, which are designed to help the employee meet the stated goals.
• Reasonable Timelines: The duration of the plan must be reasonable and sufficient to allow for meaningful change. A timeline that is too short may be interpreted by a court as a “countdown clock” for a predetermined termination.
• Clear Paper Trail: An employer should document every check-in and feedback session, following up with written summaries that record both the progress made and the employee’s own comments or explanations. This creates a contemporaneous record of the employer’s ongoing efforts to assist the employee.

Contract Renewal

The introduction of a new contract during a PIP adds another layer of complexity. If a renewal is presented only to the struggling employee, courts may view the timing with skepticism, potentially interpreting it as a “set-up” to limit severance liability right before a termination, thereby raising the risk of bad-faith damages.

This risk will be reduced when an employer renews the employment agreements throughout the entire organization as part of a broader compliance initiative. Additionally, the employee on the PIP should be treated consistently and equally with their peers. This can indicate that the renewal serves as an administrative requirement rather than a targeted action against a specific individual.

Furthermore, for any new employment contract to be legally binding, it must be accompanied by “fresh consideration.” An employer cannot simply demand a signature in exchange for continued employment under new terms. Instead, the implementation should involve a new benefit that the employee has not previously received, such as:

• A one-time signing bonus;
• An increase in base salary;
• An additional entitlement to vacation time or benefits.

Final Thoughts

Effectively managing difficult employees through PIP implementation can be a delicate process that requires careful consideration, especially when it coincides with employment contract renewals. By approaching these situations with transparency and an emphasis on good faith, employers can navigate potential legal pitfalls while fostering a supportive work environment.

If you have recently received a Performance Improvement Plan (“PIP”) and are feeling uncertain about your next steps, you’re not alone. You may feel blindsided, especially if you have not been told that your performance is a problem: Is this a genuine attempt to help me improve, or is it a step toward termination?

Do not let confusion and anxiety overwhelm you. Gain clarity on what a PIP truly means, explore your options for improvement, and learn how to respond to the PIP. Understanding your situation can empower you to make informed decisions about your career.

What You Should Know About Your PIP?

In theory, a PIP is a tool used by employers to help an employee correct performance issues through clear expectations, measurable goals, and constructive feedback. It is meant to be part of a good-faith effort to support improvement on specific performance issues.

However, that is not always how it plays out in practice. Some employers use PIPs as a strategic way to build a paper trail to justify letting an employee go “with cause”.

Here are some of the red flags that your PIP may be more about protecting your employer than genuinely helping you succeed:

• You were never given feedback or warnings about your performance before the PIP.
• The goals are vague, unrealistic, or impossible to meet within the timeline provided.
• You were not provided with or were denied any resources or assistance to improve the performance issues alleged by the employer.
• You are being micromanaged or excluded from meetings you used to attend.

If any of these apply to you, the PIP may be part of a plan to manufacture cause for dismissal or to push you to resign.

A PIP May Be A Cover-up for Your Termination And You May Get Additional Compensation

Some employers use PIPs as a cover for their intent to terminate. They think that if the PIP fails, they may be able to justify a “cause” termination, or pressure you into quitting, to avoid paying you what you are owed – your notice of termination or pay in lieu of notice.

However, in Ontario, employers must meet a high legal threshold to terminate someone “for cause” without paying reasonable notice under common law. A single poor performance review or PIP is almost never enough. To prove cause, the employer must show serious and repeated subpar performance and that the employee was given a reasonable opportunity to improve.

In some cases, a bad-faith PIP, especially if combined with other mistreatment (such as public shaming), can justify a constructive dismissal claim. That means your employer has essentially terminated you through their conduct, even if they have not said the words.

Sometimes, an employee may be awarded additional damages due to their employer’s bad-faith implementation of PIP. In a 2010 Ontario case, an employee was awarded $45,000 for their employer’s manner of termination, including the failure to carry out the PIP in good faith.

How to Protect Yourself

If you have been put on a PIP, here is what you can do:

Document Everything

Signing a PIP to acknowledge receipt does not mean you agree with it. Clearly state in writing (email is fine) if you dispute the allegations, timelines, or process. This protects your position later if legal action is necessary.

Additionally, save emails, meeting notes, and any correspondence related to your performance.

Speak to a Lawyer

If you have been put on a PIP, a lawyer can help you:

• Respond to the PIP in writing.
• Negotiate a severance package if you’re being pushed out.
• Assess whether the PIP process amounts to constructive dismissal.
• Assess whether you are entitled to additional compensation due to how your employer implemented the PIP.

Next Steps

While your employer may be acting in good faith with the intent to help you, if it feels off or if it comes as a surprise that may not be the case. Remember, your employer cannot get rid of you without consequences.

If you have received a PIP and feel it is being used unfairly, especially if it came out of nowhere or seems designed for you to fail, do not wait until you are dismissed. Speak with an employment lawyer right away. You may be entitled to a severance package, and in some cases, additional damages.