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Norman Waterhouse

$205,000 Thanks! When a Performance Improvement Plan Backfires

In the recent decision of Pezzimenti v Rotary International [2019] FCCA 1854, Judge Driver of the Federal Circuit Court of Australia’s (the Federal Circuit Court) held that an employer who had mismanaged an employee on a performance improvement plan and unfairly dismissed him was liable for damages to the employee.

The Applicant, Mr Pezzimenti, was employed by the Respondent, Rotary International, as the International Officer Manager of Rotary International’s South Pacific and Philippines Offices. Mr Pezzimenti was employed in this position from 8 January 2007 until his termination on 30 June 2017.

On 27 October 2016, Mr Pezzimenti’s supervisor, Mr Huerta, raised concerns about Mr Pezzimenti’s performance and placed him on Performance Improvement Plan (PIP). The PIP commenced on 28 October 2016 and was to run until 28 February 2017. In order to successfully pass the PIP, Mr Pezzimenti was required to satisfy “performance objectives” known as “deliverables”.

All was well and good until Mr Pezzimenti filed a formal complaint of bullying against Mr Huerta on 13 December 2016. The complaint concerned the manner in which Mr Huerta pursued the PIP process. On 28 February 2017 Mr Pezzimenti met with Mr Huerta where Mr Huerta noted that only one deliverable was still outstanding.

On 5 April 2017, Mr Pezzimenti met with Mr Huerta to discuss the outcome of the PIP. Mr Huerta informed Mr Pezzimenti that he was unable to assess his progress on one deliverable and that Mr Pezzimenti had failed to achieve the other three deliverables. The meeting lasted for approximately 15 minutes before Mr Pezzimenti was informed his employment was suspended and was asked to leave the office immediately.

On 11 April 2017, Mr Pezzimenti commenced general protection proceedings in the Federal Circuit Court. Shortly after, Rotary International enquired into Mr Pezzimenti’s leave records, his email account and attendance at work and made three allegations regarding Mr Pezzimenti’s conduct.

Rotary International then issued Mr Pezzimenti with two show cause letters. The second show cause letter requested Mr Pezzimenti attend a Skype meeting with Rotary International on 27 June 2017 to discuss why his employment should not be terminated. Mr Pezzimenti did not attend this meeting and Rotary International terminated his employment on the basis of the three allegations.

Mr Pezzimenti subsequently amended his original application to the Court. In particular, Mr Pezzimenti alleged that Rotary International had taken adverse action against him in the following instances:

  1. Mr Huerta placing him onto a PIP;
  2. Rotary International’s requirement to attend the show cause meeting on 27 June 2017; and
  3. The termination of his employment.

Mr Pezzimenti sought monetary compensation for loss of wages and other income to retirement.

Decision

The Federal Circuit Court found that the Rotary International had reasonable concerns regarding Mr Pezzimenti’s performance and appropriately placed him on a PIP. However, the Federal Circuit Court held that Rotary International’s attitude towards Mr Pezzimenti changed following the filing of the formal bullying complaint and commencement of proceedings.

The Federal Circuit Court noted that Mr Pezzimenti’s non-attendance to the show cause meeting on 27 June 2017 was not significant as it was a “precursor to the dismissal”. The Federal Circuit Court indicated Rotary International viewed the meeting as necessary to demonstrate procedural fairness prior to the dismissal.

The Federal Circuit Court held that “the goalposts of the PIP themselves changed following the commencement of proceedings. It was as if Mr Pezzimenti was from that point set up to fail”. In summary, the Federal Circuit Court held that Rotary International “went looking for additional reasons to dismiss” Mr Pezzimenti following the commencement of proceedings.

Notably, the Federal Circuit Court held that had Mr Pezzimenti not been dismissed, the likely result of the PIP would have been redundancy of Mr Pezzimenti’s position or a managed exit. Further, the Federal Circuit Court considered if Mr Pezzimenti and Rotary International had negotiated an appropriate exit plan, redeployment within Rotary International’s business may have occurred.

Nevertheless, the Federal Circuit Court held that Rotary International had failed to discharge the reverse onus of proof that it did not take adverse action against Mr Pezzimenti for exercising a workplace right. Due to Mr Pezzimenti’s age and prospects of future employment, the Federal Circuit Court awarded Mr Pezzimenti 12 months’ wage which totalled $205,000.

Take Home Messages

Employers must ensure that placing an employee on a performance improvement plan is justified and aims to assist them in improving their performance. If an employee who is on a performance improvement plan makes a workplace complaint, employers are obligated to investigate into the complaint and not make the assumption that the complaint is frivolous or vexatious. Importantly, the goalposts of the PIP should remain the same regardless of the complaint having been made as these are two distinct issues, which should be dealt with separately.

In this case, should Rotary International have followed through with the PIP and not changed the goalposts, the parties could have reached an agreed exit plan, saving the company a large sum of money or damages and legal fees.

When faced with a set of complex circumstances such as this, it is best to seek advice earlier on in the piece so that employers understand the options available and the risks associated before proceeding.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au or Virginia Liu on +61 8 8210 1279 or vliu@normans.com.au.

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