The Court of Appeal has confirmed that fair procedures do not necessarily apply to performance related dismissals, including during the probationary period.

Key legal development

A number of recent Court decisions suggested that employers must apply fair procedures when addressing performance related concerns: that where a probationer’s performance falls below the standard required it must be treated in a manner similar to addressing misconduct. The Court has now clarified that performance concerns in fact do not of themselves trigger such rights, unless the employment contract contains such a commitment.

However, it remains the case that various risks may still arise in the context of managing probation. Employers should continue to approach these matters reasonably and with appropriate care.

Background

One of the primary purposes of probationary periods is to assess the performance and suitability of a new recruit. Dismissal during an employee’s probationary period is often regarded as relatively safe because an employee will not have accrued a year’s service, which, subject to limited exceptions, is a prerequisite for Unfair Dismissal claims. Dismissals, therefore, could be effected without running the risk of an Unfair Dismissal claim and having to ensure that the dismissal is defensible both substantively and procedurally.

However, employees can seek to challenge dismissals in other ways. One of these potential avenues of redress, albeit considered to entail a much higher level of risk for the employee, is to request the High Court to intervene in a dismissal. This was the case in O’Donovan v Over-C Technology Ltd & Another1. The former employee sought various orders from the High Court, including, amongst other remedies, a declaration that he continued to be employed and that the purported dismissal was invalid and of no effect. His challenge to the dismissal was successful. This was mainly by reason of the lack of procedural fairness in effecting the dismissal. The Court’s decision was consistent with there being a requirement to apply fair procedures when managing poor performance.

The employment contract at issue in that case provided that the company would assess performance during the probationary period and the company could either take remedial action or terminate employment if performance was not up to the required standard. There was no express contractual commitment that fair procedures would be applied in the assessment of performance. Nonetheless there was found to be a strong case to imply a contractual right to fair procedures in the assessment of performance during the probationary period.

This outcome was appealed2 and the Court of Appeal found that a dismissal arising from concerns about sub-standard performance does not require fair procedures in order to be lawful.

“If an employer has a contractual right – in this case a clear express right – to dismiss an employee on notice without giving any reason, the court cannot imply a term that the dismissal may only take place if fair procedures have been afforded to the employee, save where the employee is dismissed for misconduct.”

What next for employers?

Every performance management process must be assessed on its own particular circumstances as well as the terms of the employment contract and the policies of the employer. The former employee in the above case brought his challenge to the Courts at least in part because he had not yet accrued the protections under the Unfair Dismissals Acts. Many other employees will have accrued the requisite service to bring an Unfair Dismissal claim. They may benefit from the exceptions to the need to have accrued one year’s service. They may benefit from other statutory protections which do not require one year’s service e.g. relating to unlawful discrimination and certain kinds of penalisation.

In addition, challenges to dismissals during probation frequently come before the Workplace Relations Commission and the Labour Court under the Industrial Relations legislation. An employer will be expected to be able to show reasonableness and some level of fairness in dealing with performance issues at all stages of the employment relationship. Anything resembling summary termination, without the necessary element of reasonableness, runs a risk of being challenged in some forum. Nonetheless, the appeal in O’Donovan will provide welcome clarity on the general legal position concerning fair procedures.

Employers should now review the wording of their contractual and policy documents to confirm the extent of their obligations in effecting terminations for poor performance and consider appropriate amendments as may arise.