Guide on How to Terminate an Employee for Poor Performance

Under the Canadian jurisprudence, the threshold of terminating an employee for just cause due to their poor performance is extremely high. This often results in an unfortunate position for some employers where they fail to establish just cause for termination. They not only have to pay severance packages to the terminated employee but also aggravated damages in some cases. In this blog, we would like to address the issue of terminating an employee for poor performance.

Employers will sometimes terminate their employees for poor performance. From the employers perspective, poor performance can constitute “just cause” dismissal. Despite just cause termination, the threshold to establish “just cause” for poor performance is high under both the Employment Standards Act and under the common law. In some cases, termination for just cause when none exists may allow a judge to order the employer to play aggravated damages in addition to termination pay.

To establish poor performance or incompetence, the employer must show that the employee fails to perform the essential conditions and duties of their job and that this has occurred on an ongoing basis. Isolated incidents of poor performance will not justify “just cause” dismissal.

Employers who want to establish just cause for poor performance must ensure that they have established objective standards of performance. Courts will also consider mitigating factors such as work volume, whether the employee hired was experienced in the job and whether or not training was provided.

If the employer finds there are further issues of performance despite training being given, progressive discipline and warnings must be given prior to termination. Warnings should be in writing and should include concerns related to performance and/or consequences that may occur if performance issues are not rectified. Support for improving should also be provided to the employee with a reasonable time limit for improvement. This will allow for an objective standard to be created and will show the court that the employer took active steps to help the employee rectify their performance issues. If the employer finds that the employee has failed to correct their issues within the required time frame, courts will look positively to the objective performance standards created by the employer in justifying termination.

In Cottrill v. Utopia Day Spas and Salons Ltd. 2019 BCCA 26, the plaintiff was a skincare specialist. The defendant began a review of the plaintiff’s work and found out that she was underperforming. The defendant took active steps to warn the plaintiff about her performance issues and gave her three months to improve. If she did not improve, she would be terminated. The plaintiff over the course of three months significantly increased sales and established a new client base. Despite her improvement, the defendant terminated her “for cause” because she had not met all performance standards and because the defendant felt she had attitude problems.

The defendant argued that the plaintiff failed to meet all performance standards despite the warning while the plaintiff argued that the standards set to determine her performance were not a reasonable opportunity for her to improve. The court stated that failing to meet all performance standards does not justify “just cause” dismissal in all circumstances. Ultimately, the court held there was no just cause and that it was unreasonable of the employer to establish new performance standards it had not previously required of the plaintiff.

The court also noted that the defendant failed to provide a reasonable and fair assessment of the plaintiff’s performance and that the employer could not rely on vague statements of bad attitude to dismiss the plaintiff. Objectively, the plaintiff met her performance criteria and increased sales and this entitled her to damages in lieu of notice as well as aggravated damages for the defendant’s failure to consider her enhanced performance during the three months and for the defendant’s breach of the duty of good faith.

Progressive Discipline and Warnings Needed Prior to Termination

When it comes to terminating an employee who has failed to achieve their performance goals, immediate dismissal of the employee is often unwarranted. Before finding termination for cause, courts often require employers to show that they have taken extra steps to notify employees of their shortcomings and give them reasonable amount of time to rectify them. Therefore, progressive discipline and warnings directed at these employees are needed prior to termination. It is advisable for employers to follow the following steps before terminating an employee for poor performance so that they could avoid liability issues in wrongful dismissal claims.

Few Steps to Follow Before Termination:

a. Performance Standards Created and Expectations Clearly Communicated

Employers must formulate a clear performance policy at the workplace. When an employee is found to have an ongoing work performance issues, employers should clearly communicate this issue to the employee and notice them of workplace performance expectations.

It should be pointed out to these employees that a progressive discipline policy has been established and corrective actions are expected of them. If they continue to fail to achieve these goals, termination will take place. However, employers should bear in mind these improvement goals should be reasonably attainable when they put the employee on a Performance Improvement Plan (PIP).

b. Documentation is the Key

Employers should document any feedbacks or coaching that have been offered to the employee. Any written warnings issued to the employee should be put on the employee’s record. These carefully documents can be instrumental in defending a wrongful dismissal claims when the terminated employee brings the issue to the court.

c. Be Consistent in Applying Performance Standards and Providing Feedbacks

Employers should be consistent in applying performance standards to employees so that it will not be considered as arbitrary by the court. It is the same case when it comes to providing feedbacks to the employees who are on the PIP.

If an employee’s performance is consistently substandard even when they are on the PIP, make this clear to the employee. If the employer fails to warn the employee of their substandard performance, this could be construed as condonation by the court, which can bar the employer from any attempt to terminate this employee for cause in the future.

d. Allowing the Employee to Have Reasonable Amount of Time to Improve

Employers should not jump at the opportunity to terminate an employee for cause if their performance remains substandard. They should give the employee reasonable amount of time to improve their work performance.

Employers should issue further warnings and document them if the employee fails to improve after a certain amount of time. Employers should alert the employee of the danger associated with consistent substandard performance that could lead to termination of their employment. There is no fixed number as to reasonable amount of time. It is case specific.

 Duty to Accommodate

Before terminating an employee for poor performance, employers should also fully consider their duty to accommodate under relevant human rights legislation. If the employee’s performance issue is related to a prohibited ground of discrimination such as age or disability, it is essential for the employer to accommodate such an employee to the extent of hardship before it considers any termination of the employment.

If you are seeking to terminate an employee for poor performance, contact top Toronto employment lawyer, Stacey Ball, to ensure your organization has engaged in the requisite steps to establish an objective standard. If you are an employee who has been terminated on this basis, our office can help you challenge your employer’s decision. Call 416-921-7997 extension 225 to book a consultation.