Failing to accommodate struggling employees—even on a PIP—could land employers in legal trouble, says lawyer.
When an internal announcement by Microsoft revealed that it would be offering underperforming employees 16 weeks of severance pay instead of going on a performance improvement plan (PIP), it drew controversy.
The policy shift is part of Microsoft's "new and enhanced tools" framework, according to Business Insider.
On April 22, Amy Coleman, Microsoft's Chief People Officer, emailed the announcement to managers, stating that the company would be using this to help “accelerate high performance and swiftly address low performance," among other changes.
Under the new approach, underperforming employees would be able to join the globally standardized PIP, which offers exceptions and a timeline of approval, or opt out of it by signing a voluntary separation agreement.
Additionally, employees who receive a zero to 60 per cent performance rating (on a scale of 200) on an active PIP will be barred from reapplying to the company for two years after their departure.
PIP’s have long been a workplace tool for addressing underperformance, says Jason Wong, an employment lawyer at Wong Law. But how they’re implemented is critical: employers and HR teams must apply them fairly and transparently to avoid legal risk.
One legal consideration when using a PIP is how a resulting termination is classified, says Wong. It can fall into two categories: “for cause” or “without cause.”
For cause, termination is reserved for serious misconduct, such as harassment, threats, fraud, or repeated insubordination, and carries no entitlement to severance, according to the Ontario Employment Standards Act (ESA).
Without cause, termination can be due to organizational restructuring, profit-related pressure, or business decisions, in which case employers are required to provide working notice or severance pay.
Wong says a termination after a PIP would most likely fall under without cause. However, in some cases, a PIP can be used by employers for with cause termination.
“If an employer wants to terminate for cause due to performance or workplace behaviour, they would need to show that they gave the employee an opportunity to improve,” he says.
So, how should employers go about implementing a PIP? According to Nora Chahine, employment lawyer at Ellen Low & Co, it begins with open communication.
“One issue that I see with PIPs is that there's not enough documentation proving the underperformance,” she says.
Before putting any employee on a PIP, it's important for an employer to first provide a warning and give them time to see if they’re improving. If performance does not improve, then Chahine encourages employers to go ahead with the PIP.
Both lawyers note the importance of considering whether performance issues may be linked to protected grounds under the relevant Human Rights Code.
Chahine says before putting an employee on a PIP, employers need to assess if other factors are involved in their lack of performance. For instance, someone may have a family accommodation issue—such as a parent taking care of an ill child—leading to poor performance or may be experiencing mental health issues and disabilities.
Even when employees are on a PIP, HR and employers must continue to provide accommodation where needed.
“If a person has anxiety, just to reduce the anxiety for now, that's going to be a reduced workload and then gradually increasing the workload back to a full workload,” she adds as an example.
In Ontario, employers have an obligation to accommodate to the point of undue hardship. Failure to accommodate, even during a PIP, can lead to liabilities for the employer, such as being required to pay for damages, the lawyers explain.
When it comes to creating an actual plan, Chahine says employers and employees need to agree to the terms.
The plan should clearly outline the specific duties or performance areas that need improvement, she explains. “So maybe you have data that shows an employee is underperforming in certain tasks, and they need to reach a certain level,” Chahine says.
Employers should also conduct regular check-ins with the employee—providing updates on whether expectations are being met and if the employee is improving in line with the plan.
The goals and expectations set out in a PIP must be achievable and realistic.
If an employee sees a PIP as unrealistic, they may interpret it as an attempt to push them out—or as bad faith by the employer, and “that could be construed as constructive dismissal,” she says.
Under the Canada Labour Code, constructive dismissal can occur when an employer makes significant changes to an employee’s contract or creates a workplace environment intended to “force an employee to quit.”
Chahine recommends the timeline of a PIP be established on a case-by-case basis. A newly hired employee on a plan might have a short turnaround to improve their performance, while a long-term employee may be given more time, she adds..
“If you really like [an] employee, and you would like to give them a chance, then give them time to improve. Don't put a strict deadline on the PIP,” Chahine says.
