The power of a PIP – performance improvement plan

March 17, 2013 - by: Marie-Julie Lanctot 0 COMMENTS

By Marie-Julie Lanctôt

Under their management rights, employers may establish fair, accurate, and achievable performance standards. A recent decision from the Labour Relations Board of Quebec, Piché et Impérial Tobacco Compagnie ltée, 2012 QCCRT 0600 (decision available in French only), serves to illustrate how Canadian employers may properly dismiss employees for poor work performance despite the fact that Canada doesn’t have at-will employment.

Facts

In 2006, the employee was hired as a sales representative for the employer, a cigarette manufacturer. In 2008, the role of all the company representatives was modified following a significant change in the industry. From that moment, the employee’s work performance began to diminish.

The employer took various steps to try to improve the performance of the employee. These steps included assigning her to a position with a smaller volume of work and developing a personalized seven-month performance improvement plan (PIP). The employee’s performance did then improve to the minimum required levels. The employee was consequently taken off the PIP in April 2010.

In fall 2010, however, the employee began underperforming again, over several months. She was dismissed at the beginning of 2011, based on her inability to properly fulfill her duties despite the close supervision she had received.

The employee filed an unjust dismissal complaint under Section 124 of the Labour Standards Act of Quebec. She claimed her dismissal was disciplinary in nature. The employer argued it was an administrative decision.

Decision

First, the tribunal found that the dismissal was administrative, not disciplinary, in nature.

A disciplinary dismissal aims to correct the wrongful conduct of an employee (e.g., repeated lateness or absences, negligence in the execution of work, etc.). Except in the case of serious misconduct, this type of dismissal will be upheld only if the principle of progressive discipline has been followed.

On the other hand, an administrative dismissal is the consequence of the involuntary shortcomings of an employee, such as the incapacity to perform work properly. In such cases, a dismissal will be upheld if it’s established that it didn’t result from an arbitrary, unfair, unreasonable, or discriminatory decision. The tribunal explained that such a dismissal would be set aside if an employer failed to take one or more of the following steps:

  1. Clearly communicate to the employee the company policies and its expectations.
  2. Advise the employee of the performance gaps and required improvements.
  3. Provide the necessary support to the employee so that he or she can address and achieve the objectives.
  4. Provide the employee reasonable time to adjust.
  5. Clearly notify the employee that the lack of improvement on his or her part may result in dismissal.

Despite the fact that the employee had initially improved and successfully passed her formal PIP, the tribunal found that the employer had taken all the necessary steps before terminating the employee for cause. A second adjustment period following her more recent underperformance wasn’t required. The employer was entitled to expect that any improvement in performance following the initial PIP be maintained.

Takeaway for employers in Canada

Employers often wonder what happens if an employee is put on a PIP, improves to the required levels, but some months later returns to unsatisfactory levels of performance. From this decision employers, at least those in Quebec, will be happy to learn that once a clear and well-defined action plan has been put into place and satisfactorily completed by the employee, improvements are expected to be permanent (or at least long lasting). A second PIP period isn’t required before the employer can terminate the employee for cause.

While the analytic framework is somewhat different in the other, common law provinces of Canada, this decision may nonetheless be instructive and useful in the rest of Canada as well.

About Marie-Julie Lanctot:
Marie-Julie Lanctôt is a member of the Labour, Employment and Human Rights practice group. She focuses in particular on the fields of labour relations, employment law and non-compete agreements. In the course of her practice, Marie-Julie Lanctôt is called upon to plead before the courts of justice, administrative tribunals and arbitration boards.

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