What happens when a senior employee consistently fails to meet mutually agreed performance targets?
The Industrial Court of Malaysia recently dealt with a case involving a long-serving bank employee who was dismissed for allegedly failing to meet performance standards after being placed in a consequence management programme.
The worker argued that the targets set were unreasonable, he lacked proper guidance, and the dismissal was tainted by bad faith, while the company maintained that, despite multiple opportunities and support, the worker consistently failed to improve his performance.
The worker's case centred on several key arguments: he was wrongfully placed in the consequence management programme without justification, the targets assigned were unrealistic for someone without a sales background, he was not provided with adequate guidance or training during the programme, and his request for transfer to a position closer to his home was neglected.
The company maintained that the worker, with over 30 years of service, including 16 years in sales roles, was given four performance reviews with ample assistance and guidance, but refused to improve or meet minimum expectations.
Employment history and programme placement
The worker commenced employment with the company as a clerk on 16 July 1993 at its branch in Pasir Puteh, Ipoh, Perak.
On 1 April 2004, he was promoted to cash officer at the branch in Kampung Koh, Sitiawan, Perak. He was later designated as a sales support executive in May 2008, transitioned to financial services executive on 15 February 2016, and on 1 January 2020 was designated as a consumer sales executive with a "Tier 5" target, the highest sales target category.
During his tenure, the worker underwent annual performance evaluations and assessments. Consistently over the years, his performance was rated by the company as "Met."
However, in 2022, his performance rating for the year 2021 was rated "Not Met" by the company. Via a letter dated 27 April 2022, the company placed him in the consequence management programme, which would monitor and review his performance on a bi-monthly basis between 1 June 2022 to 31 May 2023.
The consequence management programme is designed to create an environment where poorly performing employees can discuss their difficulties and shortfalls with their line manager to improve work performance.
During the programme, the worker was subjected to four performance reviews over one year, exceeding the company's requirement of three reviews within six months.
The worker was dismissed via termination letter dated 31 October 2023 for "Failure to perform work to meet the minimum expectations of the Bank" effective 1 November 2023, with his last held position as consumer sales executive earning a monthly salary of RM9,742 and monthly allowance of RM1,450.
Performance results and worker's contentions
According to records (case no. 10/4-311/24), in the first performance review covering June to July 2022, the worker's achievements of 60.4% and 66.8% respectively, were below the minimum expectation and rated "Not Satisfactory."
In the second review, covering August to September 2022, achievements of 68.9% and 67.2%, respectively, were also rated "Not Satisfactory." In the final review covering October to December 2022, achievements of 62.3%, 67.1% and 66.2% respectively, remained below minimum expectations.
In the extended final review covering April to May 2023, achievements of 43.1% and 54.9% respectively, continued below the minimum expectation.
The worker was issued warning letters dated 17 August 2022, 20 December 2022 and 4 April 2023, respectively.
Subsequently, a show cause letter dated 8 September 2023 was issued, to which he responded on 3 October 2023.
The worker contended there was no reason for him to be placed in the programme and that the company did not disclose the minimum performance expected or the criteria by which performance was evaluated.
He argued the targets were unreasonable for someone with no sales background and that he was not provided with guidance, assistance, training, coaching or support.
The worker further argued that the period coincided with the post-pandemic economic downturn, with Movement Control Order restrictions making it challenging to secure business.
He maintained he had health conditions, and the long-distance commute from Ipoh to Sitiawan caused difficulties, leading him to request a transfer to a branch closer to Ipoh, which the company neglected to consider.
The worker argued the programme was designed with the sole purpose of failing and terminating him, and that the dismissal was tainted by bad faith.
Company's evidence and support provided
The company presented evidence that the worker was a senior employee with over 30 years of experience, of which at least 16 years was spent in sales roles.
The company maintained that within the programme, the worker was given four opportunities via three performance reviews and one extended review to improve his performance and meet targets that were mutually set and agreed upon.
Evidence showed the targets were mutually agreed between the company and worker according to guidelines, and the worker signed documents acknowledging these targets without voicing objections.
The company provided evidence of various forms of support and guidance throughout the programme, including involving the worker in joint marketing activities with business development executives and operations officers, guiding him in optimising sales action plans, monitoring his productivity and sales origination, and involving him in visiting developers and businesses to source for mortgage sales.
The worker had undergone and attended several sales-related training sessions since 1993, as evidenced in training records. The company's line manager and head of consumer banking both testified about providing comprehensive support and guidance.
Evidence showed the worker acknowledged the advice and guidance by signing consequence management performance improvement plan forms.
Throughout the programme, the worker did not raise complaints regarding difficulties in meeting performance targets despite the programme being designed to create an environment where employees could discuss concerns comfortably.
Sales performance dashboards for periods between January 2022 and December 2022 and January 2023 and August 2023 showed the worker's performance consistently below 100%, which denoted the company's minimum expectation applicable to all employees.
Court's legal analysis and findings
The court applied the three-tier test established in Ireka Construction Berhad v. Chantiravathan to determine whether the dismissal was justified: whether the worker was warned about unsatisfactory performance, whether he was accorded sufficient opportunity to improve, and whether he failed to sufficiently improve.
The court noted the legal principle that "Whenever a man is dismissed for incapacity or incompetence it is sufficient that the employer honestly believes on reasonable grounds that the man is incapable or incompetent. It is not necessary for the employer to prove that he is in fact incapable or incompetent."
The court found that by the very nature of the worker's job and ranking, he ought to have been fully aware of what was required and fully capable of judging himself whether he was performing satisfactorily.
The court applied the principle that "those employed in senior management may by the nature of their jobs be fully aware of what is required of them and fully capable of judging for themselves whether they are achieving that requirement. In such circumstances, the need for warning and an opportunity for improvement is much less apparent."
The court examined evidence showing the worker's repeated failure to meet minimum expectations over the four performance reviews.
The court noted that although the company only needed to carry out three performance reviews within six months under its guidelines, the worker was given four reviews over one year, exceeding what was contractually required.
The court found the worker acknowledged receiving support and guidance by signing relevant documents, and that at no point during the programme did he complain the targets were unreasonable or unattainable.
Final determination and dismissal of the claim
The court concluded that the company had met the three-tier test before dismissing the worker from employment.
First, the court found the worker had been warned about his poor work performance through the consequence management programme placement letter, warning letters dated 17 August 2022 and 20 December 2022, and show cause letter dated 8 September 2023.
Second, the court found the worker was accorded sufficient opportunity to improve through four performance reviews over one year with ample assistance and guidance including joint marketing activities, sales action plan optimisation, productivity monitoring, and site visits.
Third, the court found that despite opportunities given by the company, the worker failed to sufficiently improve on his work performance.
The court noted the worker's performance remained consistently below minimum expectations throughout all four reviews, with achievements ranging from 43.1% to 68.9% against the 100% minimum expectation benchmark.
The court found no evidence the worker demonstrated necessary commitment, initiative or proactivity, and his productivity remained consistently low despite 16 years of experience in sales positions.
The court stated: "This Court is satisfied that the Company had met the 3-tier test laid down in Ireka Construction Berhad v. Chantiravathan before dismissing the [worker] from his employment."
The court concluded: "the Court finds that the Company had discharged its legal burden in proving that the [worker]'s dismissal from his employment in the Company (Bank) was done with just cause and excuse. The reason for dismissal, which was centered around the [worker]'s poor work performance, was not tainted with mala fide."
Accordingly, the worker's case was dismissed.
