The perils of performance plans (PIP) in the adverse action context

27 February 2020

The Federal Court has imposed a penalty just shy of the statutory maximum against an employer following an adverse action claim by a dismissed manager.

In issue

  • Whether a failures to meet a PIP can justify termination following the commencement of proceedings.

The background

The applicant, Mr Pezzimenti was employed by Rotary International. Mr Pezzimenti was placed on a performance plan (PIP) following concerns about unsatisfactory performance. Shortly thereafter, Mr Pezzimenti made a formal bullying complaint against his manager in relation to the PIP.

The applicant later met with his manager to discuss the PIP and was told that he had failed to meet certain aspects of the PIP. The applicant’s employment was suspended and he was asked to leave the premises immediately.

Mr Pezzimenti commenced proceedings in the Federal Circuit Court, alleging that he had been subjected to adverse action because he exercised a workplace right to make a complaint about his employment (the bullying complaint).

Immediately after commencing proceedings, Rotary conducted various investigations into Mr Pezzimenti’s conduct, including attendance at work. Mr Pezzimenti was issued with a show cause letter, and was subsequently dismissed.

Mr Pezzimenti amended his application to include the show cause process, and termination of his employment as alleged adverse action.

Rotary argued that the reasons for the termination of employment were:

  1. the applicant had breached an obligation of confidence owed to the employer;
  2. failing to ensure the accuracy of leave records within the respondent’s payroll system;
  3. the applicant’s unauthorised absence from work; and
  4. failing to meet the standards set down in the PIP within the specific time frame.

The decision

The Court held that Mr Pezzimenti had been dismissed for exercising a workplace right. While Rotary was justified in its concerns about Mr Pezzimenti’s performance, the Court considered that the 'goalposts of the PIP themselves changed following the commencement of proceedings'.

In relation to the alleged breach of confidence, the Court noted this had an 'air of artificiality' and represented an attempt by Rotary to find additional reasons to dismiss Mr Pezzimenti.

The Court awarded the applicant $205,342 in damages, which represented compensation for the 12 month period when his employment was terminated prematurely.

The decision on penalty and costs

Following the principal proceeding, the Court imposed a penalty of $50,000 on the Rotary. In imposing this penalty, the Court noted the objective seriousness of this contravention by Rotary as being at the top end of the range.

The Court was also influenced by Rotary’s circumstances in making the significant penalty, noting that the organisation would not have had any difficulty in meeting the penalty due to its large size or financial circumstances. The Court also felt it necessary to impose general deterrence on other employers given the reason for the dismissal was the commencement of proceedings.

Implications for you

The decision illustrates the hard-line stance that will be taken by Courts in relation to adverse action claims, particularly where the reason for dismissal is related to the bringing of such a claim by the dismissed employee.

It also offers a further warning to employers of the risks associated with using PIP and other similar mechanisms as a means to justifying dismissal in circumstances where the true reason is a prohibited one.

Pezzimenti v Rotary International (No.2) [2020] FCCA 95 (24 January 2020)

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