Background to performance management

It is not uncommon for employers to decide they want to part company with an employee, but do not have grounds to dismiss them fairly under employment law because the employee has not engaged in any misconduct and their role is not redundant.

One way around this for employers is to allege poor performance by the employee and advise them they will be placed under a performance management or performance improvement process (or “PIP”), during which performance objectives or targets will be set. The employee will be warned that failure to meet those targets could result in disciplinary sanction and ultimately in dismissal.

The employer will often then hold a “without prejudice” meeting or a “protected conversation” with the employee (which cannot be relied upon by the employee in an employment tribunal) and offer a settlement agreement as an alternative to going through the performance management process.

Many settlements are agreed this way because employers know that in most cases the employee will not want to go through a lengthy and stressful performance management process, with employees often feeling (in many cases, quite rightly) that, no matter how they perform during it, the employer has already unlawfully decided that the outcome will be termination of employment.

Key features of this case:

  • Performance Management
  • Settlement agreements
  • Settlement negotiation

It starts with a letter referring to performance and a draft settlement agreement

Bloomsbury Square partner, Garvey Hanchard, was instructed by Mr CD, an experienced executive working for a large financial institution based in London, who was faced with this familiar situation. CD had received a letter purporting to refer to performance and conduct concerns previously raised with him by the company. In fact, his personnel record did not refer to any such concerns having been previously raised with him. He was also given a draft settlement agreement marked “without prejudice and subject to contract”, under which his employment would be terminated on agreed terms, as an alternative to the company instigating its formal performance management process.

No appetite by the employer for going through the proper process

In his initial consultation with Garvey Hanchard it was identified that the settlement agreement offer did not meet the requirements for receiving without prejudice protection and would have been admissible in evidence in an employment tribunal claim. It was also clear that the employer had no real appetite to go through the performance management process and would be less inclined to do so after CD had instructed solicitors to monitor the process and take note of any irregularities that would support a future unfair treatment claim.

Thoughts on the case

Garvey Hanchard

"It was important in this case that the client sought our advice straight away and we were then able to devise a strategy which put the employer on the back foot and led to the substantially increased offer."

A simple case of getting the best possible terms

CD decided, as the company had hoped, that he did not want to work for the company any longer but did not want to accept the company’s low offer of 2 months’ pay. He engaged Garvey Hanchard to negotiate and settle his case on the best possible terms. Following a short negotiation with the company’s HR and legal team lasting around one week, CD accepted an increased offer of around £69,000, of which £30,000 was paid to him tax-free.

Bloomsbury Square London

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