Performance management of an underperforming employee is one of the more challenging human resources tasks for employers.
There are multiple steps in the process, which can be long and drawn out, and often neither the manager nor the employee is a willing participant.
In Cottrill vs. Utopia Day Spas and Salons Ltd. 2017 BCSC 704 (“Cottrill”), the BC Supreme Court has provided a timely reminder about the perils of getting performance management wrong, highlighting how difficult it can be for an employer to terminate an employee for just cause based on poor performance.
Ms. Cottrill was a skin-care therapist who had worked for a spa for approximately 11 years when she was terminated for what the employer said was a bad attitude and a failure to meet performance targets for sales and customers. Cottrill had received some warnings and client complaints over the years, but it was not until her direct supervisor left the company and senior management reviewed her record that these performance issues were brought forward.
The company gave Cottrill three months to improve her performance or lose her job. During these three months, Cottrill was to receive monthly hour-long “coaching” sessions with a manager.
Although Cottrill substantially increased her performance over the three months, she fell slightly short of some targets, and the CEO remained convinced of her attitude problem. She was ultimately terminated for cause for these performance issues.
Cottrill filed a lawsuit in BC Supreme Court for wrongful dismissal. It alleged that her employer did not have just cause and sought aggravated damages for the manner in which the employer handled her dismissal.
The trial judge agreed with Cottrill and found that the company did not have just cause to terminate her employment. The employer was ordered to pay Cottrill notice in accordance with her employment contract, as well as her legal costs and aggravated damages. It was not a good day in court for the employer.
What lessons can other employers learn from this case?
The court provided some clear guidance on what a good performance management process looks like:
•At the beginning of any performance management process, the employer must set reasonable, objective standards of performance.
•The objectives of the process (including the performance standards to be met) must be clearly explained to the employee.
•The employee must be clearly warned of the consequences of failure (generally dismissal for cause).
•The employee should be given a reasonable amount of time to meet the standards and must be supported in meeting those standards (e.g. with coaching and training).
•Throughout the process, the employee must be kept informed of his or her progress, including with warnings if he or she is failing to meet expectations.
•Any determination that the employee has failed to meet the standards should be objectively reasonable and supported by evidence. Employers who rely on subjective assessments will likely fail to meet any challenge to their decision.
When comparing the above steps with the process followed by the employer in Cottrill, it is obvious there were significant failings. For example, Cottrill was not informed at the outset of the standards she was expected to meet. Also, the employer had not provided ongoing feedback to her, so she was not aware that she was falling short of the expected standards. Finally, the termination decision was based largely on the impressions of the manager who conducted the monthly coaching sessions and was not objectively reasonable. Thus it was very easy for the trial judge to find that the legal test for a performance-based dismissal had not been met.
Cottrill is a useful example of how not to conduct performance management. But even more so, it provides a road map for a good performance management process. It is crucial that the entire process be properly carried out and be seen to be fair and reasonable. An employer who implements a process that sets the employee up for failure will have a very difficult time arguing it had just cause even if the employee fails to improve his or her performance. •
Danny Bernstein and Julia Bell are Roper Greyell LLP associates. This article is for general information purposes only and does not constitute legal advice.
