An underperforming employee was given the opportunity to improve and reach his KPIs, but the lack of training and direction meant dismissing him was unfair.
Last October, a motor services company dismissed a technician for failing to meet his key performance indicators (KPIs). The company said he fell short of selling batteries to customers at a minimum of 24 per cent of the jobs he attended and that this low sales rate differed from his colleagues.
The employer also said he failed to reduce the time he was taking at each callout (he spent longer than the 17 minutes target set for each job) and had an “exceptionally high” rate of replacing batteries under warranty. For example, the company said in August 2021 he replaced 20.6 per cent of batteries under warranty, whereas his peers replaced only 3.9 per cent.
The employer maintained that its performance expectations were in line with industry standards, and that the technician consistently failed to meet KPIs for almost 22 months.
In May 2020, the technician was placed on a performance improvement plan, but once the plan ended in October of that year, he received a formal written letter noting that due to his “continued failure to meet expectations… his ongoing employment was at risk”.
The following August, the technician was issued a show cause letter noting that while there had been some improvement in the three identified areas, his performance remained below KPI standards.
The technician was dismissed a few months later and then took the matter to the Fair Work Commission.
While Deputy President Boyce noted that KPIs “might be an acceptable tool to measure general performance comparatively amongst [technicians]”, he said the technician’s underperformance did not justify his dismissal. Among other reasons, this was in large part because the KPIs set were deemed unfair measures of his performance and there was minimal guidance provided to help him achieve those KPIs.
The Fair Work Commission ordered the employer to reinstate the employee to his previous role, stating that there is a “sufficient level of trust and confidence [that] can be restored between the parties to make their relationship viable and productive going forward”.
A major factor weighing into the Fair Work Commission’s decision was the absence of a document clearly outlining the technician’s KPIs, with specific information to support the employee in achieving those targets.
The Fair Work Commission’s finding is particularly interesting because an employer could typically be fairly confident in dismissing an employee where they have been set consistent KPIs, failed to meet those KPIs, been warned their employment is at risk, and been given an opportunity to improve. That would ordinarily be the building blocks for a very strong case for an employer, but this decision demonstrates how the detail in those KPIs and the employer’s approach are a major determining factor for unfair dismissal.
The Fair Work Commission also found that many of the KPIs set by the employer were not reasonable or fair measures by which to assess the employee’s performance.
For example, how average working time and time on job measures were a perverse incentive to not complete work properly or professionally. If those jobs were complex or difficult, they should necessarily spend more time on them. Being able to achieve many of the KPIs set was also highly contingent upon factors outside the employee’s control. The KPIs rely on things like whether the battery is or isn’t under warranty and if the employee has to change it over. This isn’t necessarily something the employee can improve upon.
Denied opportunity to respond
The show cause letter covered an asserted failure to meet KPIs in relation to the three improvement areas identified. But the employer failed to include allegations about the employee’s “assertedly poor attitude” and assertions that he was replacing allegedly sound batteries under warranty, the Fair Work Commission found. The employer said these issues weighed into its decision to dismiss the technician.
This factored into the Fair Work Commission’s decision because the employee could not have had the opportunity to respond to issues that were only raised after termination.
Employers have a responsibility to not only set performance standards, but to provide guidance and support to help employees achieve them. This case shows the fall-out that can result if clear and detailed processes aren’t followed when setting performance improvement plans.