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Capability Dismissal

Instigating a formal Performance Capability process is stressful for both Employers and Employees. Under performance by an employee not only impacts on an employer’s productivity, but can cause resentment amongst fellow work colleagues, especially if they have to pick up the slack. If as an employer you have to formally performance manage an employee, you are encouraged to seek legal advice from our specialist employment team who can advise and guide you. Performance management should be a straightforward process, but often ends up becoming over complicated and in many cases can give an employee cause to complain, or in cases of dismissal, the grounds for a potential unfair dismissal claim.

Capability has a statutory definition and “relates to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do….capability is assessed by reference to skills, aptitude, health or any other physical or mental quality” (S98 (2) (a) &S 98 (3) ERA).

What is essential is that you give an employee a chance to improve before considering disciplinary action. The ACAS code recommends at least 2 warnings are given before an employee is dismissed for poor performance. The first formal stage would be a 1st written warning, the second formal stage a 2nd written warning (and after each warning set clear expectations of what is needed to avoid further action), with the final stage resulting in potential dismissal. Employment Tribunals are legally required to take the ACAS code into consideration when considering compensation awards, and can award up to 25% increase in a compensation award if there has been an unreasonable failure by the employer to comply.

In terms of the capability performance hearings, it is essential that an employee is notified in writing of:

  • The nature of the shortcomings in their performance,
  • Date, time and place of capability performance hearing,
  • Summary of relevant information and documentation (such as agreed targets or Key performance indicators),
  • The nature of the procedure to be followed,
  • The possible consequences (such as 1st or 2nd written warning)
  • The right to be accompanied by a trade union official or fellow work colleague.

Key elements to ensure a capability performance dismissal is fair will include:

  • A proper investigation into the problem,
  • The employee has been made aware of the problem and has been given an opportunity to improve with realistic timeframes to achieve this,
  • The employee has been provided with appropriate support & training,
  • The employer is able to evidence that the employee’s performance has been reviewed during an agreed review period,
  • A disciplinary process has been followed before a dismissal occurs.

As part of the investigation stage, employers are advised to ask the question “is performance really the issue”? Is the employees ill health or a medical condition impacting on the employees performance? If so, would it be appropriate to consider reasonable adjustments? Does the employee have problems with child care or caring responsibilities? Is the employee a victim of bullying or harassment? Does the employee have an excessive workload leading to stress? Has the employee received proper training? Is there poor management within the team?

All of these factors will be relevant if and when a Tribunal comes to assess the procedure adopted by the employer, and whether it was reasonable in all the circumstances for an employer to adopt a formal capability performance procedure which has ultimately resulted in dismissal.

Potential claims which could arise include unfair dismissal (provided the employee has sufficient length of service), breach of contract claims or discrimination claims. If an employer reaches the stage whereby dismissal is likely, it may be appropriate to consider having a Protected Discussion, especially if there is any doubt about the fairness of the procedure adopted.

If dismissing an employee on the grounds of capability performance, the employee will usually be entitled to contractual notice and any accrued but untaken annual leave.

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