Labour & Employment Law Blog

The Truth About Performance Improvement Plans or “PIPs”

The truth about Performance Improvement Plans or “PIPs”

Many people act under the mistaken assumption that being placed on a performance improvement plan (commonly referred to as “PIP”) will permit the employer to dismiss them for cause without any recourse. In fact, this is not the case and employers who choose to confidently rely on the implementation of PIP are in for a big surprise.

To be clear, employers are well within their rights to place employees on a PIP. Indeed, employers are also well within their rights to terminate an employee as a result of the employee’s inability to follow a PIP. However, the fact that the employee fails to meet the expectations set out in a PIP does not give the employer cart blanche to do as they please, including terminating an employee without reasonable notice.

In this blog we have outlined 7 considerations that debunk the notion that placing an employee on a PIP serves as a bullet-proof justification for a dismissal with cause.

Clear standard

An employer who wishes to terminate an employee as a result of a failure to perform at a certain standard outlined in the PIP must clearly communicate the standard to the employee. Failure to do so will render the PIP useless and the employer will not be able to rely on the PIP in support of the employee’s termination for cause.

The standard has to be objectively reasonable

The standard set out in the PIP has to be reasonable. Employers cannot come up with an unattainable performance standard only to use the employee’s inability to live up to that standard in support for a termination without reasonable notice and / or compensation. In the event of a trial, the only person that gets to decide if the standard that the employer sought to impose through a PIP was reasonable is the judge, not the employer.

Clear warning regarding failure to meet standard under the PIP

An employer who chooses to rely on the implementation of a PIP as a lead-up to a termination of the employee’s employment with cause has to advise the employee that failure to meet the standard may result in a future dismissal including on a for-cause basis. Failure to do so will result in the employer’s inability to rely on the PIP should the employer choose to argue a dismissal for-cause in the future.

Chance for improvement

An employee who is placed on a PIP has to, by definition, be given the chance to improve legitimate performance concerns assuming the standard is reasonable to begin with. In fact, placing an employee on a number of PIPs may be appropriate in certain circumstances. Failure to grant the employee reasonable time to improve their performance will render the PIP legally worthless.

A PIP must be implemented in good faith

A PIP cannot be implemented in bad faith. It is remarkable how often we are consulted by employees who have been performing well for years only to be placed on a PIP by a new supervisor who is blatantly out to get them. Typically, the new supervisor looks to show “who’s boss” as they begin to “nit pick” on the employee’s performance not because there are objective concerns with respect to the performance but because the new supervisor simply sets out to intentionally fail the employee under the guise of “company expectations.” This typically results in our firm being retained to sue for various forms of damages.

Compliance with accommodation requirements

A PIP cannot be discriminatory. Ontario employees are entitled to various protections pursuant to the Ontario Human Rights Code, 1990 (“Code”). A PIP typically triggers the Code when an employee is expected to perform at a certain level in spite of being limited by some sort of disability and without the benefit of reasonable accommodation from their employer. In Ontario, employers have an obligation to accommodate employees to the point of undue hardship. If an employer wishes to implement a workplace standard and the employee can only meet said standard with reasonable accommodation, the employer has to implement the said accommodation. Failure to accommodate the employee and, worse, actually dismissing the employee, will result in significant liability to the employer.

Statutory amounts may still be payable to the employee

Even after everything is said and done and the employer’s PIP is found to be fair, reasonably objective, non-discriminatory and the employee was given every opportunity to improve their performance, the employee may still be entitled to statutory termination pay and severance pay under the Employment Standards Act, 2002 (“ESA”). Yes, you read that right. The only way for an employee to be deprived of their minimum statutory entitlements when a PIP is involved is if the employee’s conduct amounts to wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. An employee who is unable to meet certain performance standards, while trying to meet them, will not fall within the aforementioned three narrow categories. As such, even though the employee may be deprived of their right to reasonable notice or pay in lieu thereof at common law, they will still be entitled to various forms of compensation payable under the ESA.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.