Dismissals for poor performance should present few problems if handled correctly

Consultant editor Darren Newman argues that, as it stands, the law on performance dismissals is straightforward, and there is simply no need for employers to tolerate individuals who are not up to the job - or for amendments to the law.

We spend so much time these days trying to keep up with the latest changes in employment law that we sometimes forget the many ways in which it essentially stays the same. Governments tinker at the edges or adjust the process, but in general the main principles of employment law remain intact, particularly in the area of unfair dismissal.

Although the qualifying period to claim unfair dismissal and the maximum compensatory award have shifted over the years to reflect the approach of the government of the day, the fundamental structure of an unfair dismissal claim remains as it was when the concept was introduced in 1971. The tribunal still looks to the employer to show the principal reason for the dismissal before it goes on to consider whether or not, in all the circumstances of the case, the employer has acted reasonably.

In addition, there has been little shift in what "reasonably" means. In conduct cases, we still rely heavily on British Home Stores Ltd v Burchell [1978] IRLR 379 EAT, which set out that the approach is to ask whether or not the employer has an honest belief in the employee's guilt, based on reasonable grounds and following a reasonable investigation. When it comes to dismissals based on poor performance, the case law has a similar pedigree. A reasonable employer should apply clear standards of performance and not dismiss an employee without fairly assessing his or her performance, and giving appropriate warnings and an opportunity to improve. That was the ruling of the National Industrial Relations Court in James v Waltham Holy Cross UDC [1973] IRLR 202 NIRC and it remains the position today.

However, many in the employers' lobby have recently focused on employers' ability to dismiss for poor performance as one of the main areas of employment law that needs reform. The Beecroft report basically proceeds on the assumption that the legal obstacles in the way of an employer dismissing an employee for underperformance are more or less insurmountable. That assumption forms the basis for Beecroft's proposal on no-fault dismissals, which has led to the rather muddled provisions on settlement agreements in the Enterprise and Regulatory Reform Bill.

But, as James shows, the law on dismissal for poor performance is really quite straightforward. If employers are under the impression that the law requires them to continue to tolerate employees who are simply not up to the job, they are wrong.

I read a lot of Employment Appeal Tribunal judgments and am struck by how few relate to dismissals for poor performance. It just is not a subject that generates legal problems. It does, however, cause a great deal of anxiety for employers. Part of the reason for this, I think, is the sheer awkwardness of tackling the problem. Every organisation to which I speak says that it struggles to persuade its managers to deal with performance issues promptly and in an appropriate way. A common scenario is that issues are ignored and underperforming employees are worked around until the manager's patience finally snaps and HR is called in to do something about it. The difficulty the employer then faces is that it has tolerated the employee's poor performance for so long that it seems incongruous to suggest that the employee's standard of work is unacceptable; in many cases the employer has been accepting it for years.

There is no legal solution to this problem: employers just need to manage performance more effectively. If employers are willing to do that, the current law operates very much in their favour. There is now a two-year qualifying period for unfair dismissal, so an employer has a full two years to decide whether or not a new employee is up to the job. Within that time the employee can be dismissed on a whim and there is no need for the employer to provide any justification for the decision, much less follow a fair procedure. Employers need to act reasonably, therefore, only when something has happened to make a previously competent employee underperform.

Of course, the concept of reasonableness can be a bit slippery. It is easy enough for me to tell employers that they just need to give employees warning and an opportunity to improve: the question is how many warnings and how much of an opportunity? Because the needs of individual businesses vary, it is impossible to be precise about this. It is one of those areas where legal advice can take an employer only so far. When push comes to shove, the employer has to make a decision and be prepared to defend it if necessary.

This may seem harsh on employers, but the range of reasonable responses test weighs heavily in their favour. To find a dismissal unfair, the tribunal would have to be satisfied that no reasonable employer could have chosen to dismiss in the circumstances. That sets the bar pretty high for an employee claiming that he or she should have been given another chance.

There is always a risk that a tribunal will find that a particular dismissal was, in the circumstances, unreasonable. However, employment law is all about managing risk effectively and employers do not have to be legal experts to set clear standards, communicate them effectively and give employees a reasonable opportunity to meet them. Where that leads to dismissal, in some cases there will be a tribunal claim. But the relatively minor risk that employers face as a result should not be used as an excuse for poor performance management. Employment law is not the problem here and does not need fixing.