FWC determines termination of underperforming sales manager to be harsh

FWC determines termination of underperforming sales manager to be harsh

The Fair Work Commission has deemed the termination of a long-term sales manager for alleged underperformance to be harsh. The case highlights the need for employers to ensure that performance concerns are raised with employees in a formal manner and that if it leads to termination, that decision is clearly articulated to the employee in the process of separation.

The employee ‘SH’ had been employed by Highway Enterprises T/A Taings Noodles as a Sales Manager for sixteen years prior to his dismissal in early 2023 at the age of 72. Highway Enterprises is a manufacturer of noodles located in suburban Adelaide.

The company is owned by two brothers of Chinese ethnicity, who are joint directors and sole shareholders. The business has several related entities.

One of the brothers, ‘Mr T’, returned to the business after being absent for many years following the sudden death of the existing General Manager in June 2022.

Mr T quickly became concerned about the performance of the business and its financial stability, apportioning most of the blame in his view to the underperformance by SH.

In reply to an email from SH on 15 August, 2022, Mr T wrote, “With you so far, I found that your attitude towards work is very poor, especially for a person in sale position. I found that the quality of your work is low, and this may be related to your attitude towards it. I have had to rectify and correct your works. Your overall performance is below acceptable level”.

Until September 2022, SH was provided with a company credit card, a company car and a company mobile phone. The business withdrew each of these items over time.

During the following four months, Mr T informally monitored SH’s performance and became increasingly concerned that SH was not up to the job.

The catalyst for the separation occurred in January 2023 while SH was on annual leave after Mr T discovered that SH had committed the company to a $14,300 promotional expenditure retailer without his knowledge.

On the morning of 9 January, 2023, Mr T decided he could no longer afford to keep SH on a full-time basis. He asked SH to accompany him to a local coffee shop, where he raised his concerns and asked him what his intentions towards employment were going forward.

In evidence before Deputy President Peter Anderson, there was a dispute as to the outcome of the meeting; however, the business continued to pay SH for a further four weeks, despite him working only for three days during that period.

The initial question for the Deputy President to determine was when the dismissal actually took place because if it was January 9, SH’s unfair dismissal was some four days beyond the 21-day period for lodging applications.

In ruling in SH’s favour, the Deputy President noted,

“Mr (T) referred only to the fact that Mr (H) could no longer be employed for the hours he was working. This is not a statement ending employment. Secondly, whilst I find that the general mention was made by Mr (T) of continuing performance concerns during the coffee shop meeting … The discussion that day concluded by the parties … agreeing that Mr (H) would consider his position by the end of the month”.

The Deputy President was critical of the employer’s conduct towards Mr (T), noting the

“employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job. The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement”.

The Deputy President determined that despite significant errors by SH, the decision to terminate him was procedurally flawed as the business failed to formally performance manage him; therefore, the termination was harsh.

He determined that compensation of two weeks was warranted as it was likely that the relationship would break down due to the probability of further underperformance by SH.

SH v Highway Enterprises Pty Ltd T/A Taings Noodles [2023] FWC 1053 (5 May 2023)

For queries about managing performance, raising issues with employees, lawful terminations,  or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 0417 622 178, 1300 925 529 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

Ref: 344.0523

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