Capability dismissal refers to an employer terminating an employment contract based on poor performance where they have a reasonable belief that the employee is unable to carry out the duties required of them to the expected standards due to circumstances outside the employee’s control.
Conduct dismissals refer to where employment is terminated due to poor performance as a result of something within the employees control.
Employers are permitted to lawfully dismiss employees by reason of poor performance and capability, but they must follow a fair process in doing so.
Poor performance is one of the statutory fair reasons for employment dismissal. However, it should be treated as a measure of last resort, suitable only after reasonable attempts have been made to try to understand, manage and improve employee capability issues.
Employers should also have performance management procedures in place to proactively identify concerns and try to resolve them. This is rarely a straightforward or swift process. For example, it will be important to ascertain whether an employee’s underperformance relates to an inability to improve or to an unwillingness to improve. In the case of the latter, where the issue is a negative attitude, it would be a misconduct issue. Where the issue is capability-related, performance management would be appropriate. This distinction could be critical in the event of an unfair dismissal claim. You should be able to show that you fully considered the facts and acted fairly in opting to follow the conduct or capability procedure.
Where performance management efforts are failing to result in the required improvements, you may consider capability dismissal as a final option.
Capability dismissal should be a measure of last resort in cases of for underperformance, where efforts or consideration has been given to alternatives such as:
If a capability dismissal results in an employment tribunal, the employment tribunal may examine whether an alternative role was offered to the employee in determining if the dismissal was fair. The employer is likely to have a greater prospect of defending an unfair dismissal claim if they can show they considered alternative employment before dismissal.
An employer must also question whether or not an employee’s inability to perform is related to a disability preventing them from doing so or whether there are personal issues affecting them. If the poor performance of your employee is a result of ill health or a disability it is vital that you handle the situation carefully before continuing to follow the route of capability dismissal. For example, you will need to potentially make reasonable adjustments to assist them in carrying out their duties, find other means to support them and grant them time for their health to get better to reassess the situation.
Where there are medical issues, you should request professional medical advice on the employee’s condition. This could include a medical report from their GP or other relevant healthcare consultant and an occupational health assessment.
While medical capability dismissal would not in itself constitute unfair dismissal, if the process is not handled correctly, you may be at risk of a tribunal claim.
Where there are medical issues, you should request professional medical advice on the employee’s condition. This could include a medical report from their GP or other relevant healthcare consultant and an occupational health assessment.
Depending on the circumstances, it may be favourable and appropriate to consider offering the employee a role with lesser responsibility or less challenging KPIs. Reassignment, or demotion, can be a more favourable solution for both parties. Take professional advice if you are uncertain about varying an employee’s contract terms.
Settlement agreements certainly have their uses, particularly for senior exits, but employers should be wary of using settlement agreements as their “default” position to avoid workplace perceptions that poor performers will always receive generous pay-offs.
With an effective performance management procedure in place, your organisation should be well-positioned to address underperformance and evidence fair treatment in the event you dismiss the employee and they claim unfair dismissal.
Training of line managers, supervisors and other personnel responsible for teams and employee performance will be essential in ensuring they are aware of the process to follow if they are dealing with underperformance.
How can we help? Davenport Solicitors are experienced employment law specialists offering guidance and support to employers dealing with poor performance and capability dismissal. If you have a question about your rights and responsibilities as an employer, contact us here.
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