Termination of Employment: Poor Performance

One of the most sensitive issues in an employment relationship is termination. Both the employer and the employee have the right to terminate this relationship. However, they have to abide by labour laws, terms of the employment contract, and company procedures.

Employees who fall under the Employment Act 1955 will need to be given the right notice of termination and compensation. Under the Industrial Relations Act 1967, any form of termination /dismissal can be referred to the Industrial Court. There are procedures of ‘bona fide’ or ‘good faith’ and ‘good intention’ to be followed before any form of termination/dismissal can be carried out. Failure to follow these procedures can result in the employee being reinstated to his former employment and compensation awarded.

If the employer dismisses an employee for unsatisfactory work performance, then the dismissal must be justified both substantively and procedurally. The onus is on the employer to adduce convincing evidence to establish deterioration of work performance.

Generally, a single act of indiscipline may not always justify dismissal. On the other hand, employers must always exercise fair labour practice.

Unsatisfactory work performance can arise where an employee does not perform up to the expectations of the employer at the workplace. It can arise during the probationary period of a new employee or even after confirmation.

The established test

Before terminating the services of an employee for unsatisfactory work performance, the employer must satisfy the established test, namely:

• to bring to the notice of the employee his/her strengths and weaknesses;
• to provide the employee with sufficient training in the area of weaknesses and such training may be either on the job or off the job;
• to give the employee sufficient time to improve in the area of weaknesses and this should generally be for the whole duration of trial or probationary period;
• to give the employee constant feedback, including counselling on how the employee is performing in the job and the discussions must be documented; and
• the employee is to be given a written warning stating that if he/she does not improve in his/her work performance, then his/her services would be terminated.

If after taking the above steps, the employee’s performance does not improve, the employer can take the drastic step of terminating the services of the employee concerned.

Setting of targets

From the foregoing, it is quite evident that the employer is expected to use an objective assessment targets which are measurable, reasonable and achievable.

In Sentrafield Sdn Bhd v Kasivisvanathan P Velayutham [2007] 4 ILR 56, the claimant, a recovery officer, was dismissed because he failed to meet his collection target of RM60,000. The letter of appointment made no mention of any collection target and the figure was decided by the employer without discussion with the claimant. The court found this to be unfair labour practice. There was no warning before the termination. Also, as there was no warning before the termination, the company’s act of terminating the claimant’s employment amounted to victimisation. The court held that the claimant's dismissal was without just cause or excuse. Further, reasons given for the termination in the termination letter was vague. It had no particulars and it required the reader to guess and speculate.

It is emphasised that to avoid any dispute on what constitutes the objective criteria of assessment, the employer must have in place the core-competencies for each job. Employees must know the competencies for the job otherwise employers can change expectations at any time during the period under review; and this seems rather unfair to such employees.

Warnings before dismissal

Failure to give an employee a warning before dismissal may not, in certain cases, automatically make the dismissal unfair provided it can be shown that:

• the employee is incapable of improving,
• he/she already knows clearly what is expected; or
• the giving of the warning would make no difference to the result.

Exercise tactfulness

Apart from that, tact must be exercised to minimise the negative effects of termination on the employee and any potential blowback from a poorly handled termination.

For example, the employer should give clear explanation to an employee regarding the reasons for termination. An employee that is terminated should be notified in person, politely and respectfully. He/she must listen to the employee’s explanation with an open mind and exhaust all possible remedial steps including training, counselling and the exploration of redeployment in the case of an employee already confirmed in service.

Remedies for wrongfully dismissed employees

An employee who is wrongfully dismissed or where the contract of employment has been unjustly terminated may resort to the Labour Court, Industrial Court or Civil Court to seek the appropriate remedies.

Wolters Kluwer is pleased to present two workshops:

Managing Termination of Employment: Poor Performance, Misconduct & Retrenchment workshop aims to provide guidance on the handling of poor performance of employees, misconduct and retrenchment. This also touches on the special handling of probationers, so that employers will not be accused of wrongful dismissal. It is focused on ensuring that any termination is done following the law to try to prevent cases of wrongful dismissal or retrenchment.

Human Resource Management Function and Termination of Employment aims to clarify the confusion over the impact that employment legislation has on human resource management especially in relation to employee benefits and termination of employment. This programme will discuss the application of the latest employment legislation in human resource management and the expected updates to labour laws that may be implemented in 2019.