Performance Management and Exit Conversations in Irish Employment Law

Introduction

Addressing capability issues and manging performance in the workplace, whilst protecting the employer organisation from legal liability, takes time and lots of patience. Our RDJ LLP Employment Team is regularly requested to advise on the legality of “off the record” or “without prejudice” conversations with employees before, or during, a performance management process, in an effort to move things along and avoid a more lengthy and stressful process for all involved.

Protected Conversations

However, the legal position in Ireland is that we do not have the statutory equivalent of the UK “protected conversation”, whereby section 111A of the ERA 1996 provides that offers to end the employment relationship on agreed terms (i.e. under a settlement agreement) can be made on a confidential basis, meaning that they cannot be used as evidence in an unfair dismissal claim to an employment tribunal.  Under section 111A, such pre-termination negotiations can be treated as confidential even where there is no current employment dispute or where one or more of the parties is unaware that there is an employment problem. Section 111A can also apply to offers of a settlement agreement against the background of an existing dispute, although in such cases the 'without prejudice' principle can also apply.

Without Prejudice Conversations

In Ireland, we do have the “without prejudice” rule but it only applies in very limited circumstances.   Therefore, employers must proceed with caution when starting any conversations they intend to have on a “without prejudice” basis because the conversation may not in fact be without prejudice and may result in a claim for constructive dismissal with full disclosure of the conversation in any such proceedings.

 In that regard, for the without prejudice rule to apply, the following criteria must be satisfied.

1. There must be an existing dispute between the parties at the time of the communication; and.

2. The communication must be a genuine attempt to resolve the dispute.

In an employment context, where the conversation is about a proposed exit situation, there is generally no dispute sitting in the background.  That dispute may come at a later stage, but may not have been in existence, or even in contemplation, at the date of the discussion.

In the UK case of BNP Paribas v Mezzotero [2004] IRLR 509, EAT (UK), the Employment Appeal Tribunal restricted the circumstances in which evidence of “without prejudice” communications could be excluded from a tribunal hearing. The “without prejudice” rule applied only where there is already a dispute between the parties. The mere fact of a grievance having been submitted by an employee did not in itself cause the parties to be “in dispute”.

Recent WRC Decision

In the recent WRC decision of Ms Danica Gutierrez v Cafico Corporate Services Limited ADJ-00050330 which is dated 3 October 2024, the issue of an exit conversation with an employee during a performance improvement process was considered.

In that case, the Complainant was a Senior Client Manager with the Respondent company from 15 August 2022. She resigned from her position on 30 January 2024 and made a claim of constructive dismissal against the Company.

The Complainant was called to a meeting on 26 September 2023 with the Chief Accounting Officer and was informed that she would be placed on a Performance Improvement Plan (“PIP”). The Complainant submitted that this came without any advance warning and submits no comprehensible or tangible goals were given to her and she alleged that no specific examples of poor performance had been forwarded. She argued that plan in general was unclear and ambiguous. The Respondent denied this and stated that a plain reading of the PIP demonstrated clearly defined categories. The Respondent also argued that clear periodic milestones were also given to monitor the Complainant’s progress and a review meeting was scheduled for 25 October.

However, on 3 October 2023, just three working days into her PIP, the Complainant was invited to a further meeting and offered a severance package consisting of two months’ notice pay (despite her contractual notice being three months) and a €5,000 ex gratia payment. There was much dispute about various other aspects of the meeting that took place on that date, but the fact of the meeting and the offer of a severance package were not in dispute between the parties.

In considering the claim for constructive dismissal, the Adjudication Officer referred to section 1(b) of the Unfair Dismissals Acts and the contract test (whether the employer’s conduct amounted to a repudiatory breach of the employment contract) and the reasonableness test (whether the employer had acted so unreasonably so as to justify the employee’s resignation). The Adjudication Officer referred to the decision in Western Excavating v Sharp [1978] ICR 221 in which both tests were set out. She also noted the reciprocal duty on an employee to act reasonably in affording their employer the opportunity to address any issues as set out in Reid v Oracle EMEA Ltd [UD1350/2014].

The Adjudicator did not accept some of the Complainant’s arguments on which she grounded her complaint, including the Respondent’s failure to investigate a client complaint about her, and her argument that she was not afforded sufficient fair procedures in relation to the PIP process. In relation to the former, she noted that: “It is an unfortunate reality of commercial arrangements that if such commercial arrangements that a client may simply insist that a certain individual no longer handle their business, and they are perfectly entitled to do so if they are not satisfied with the level of service they receive.”

In relation to the Complainant’s reliance on the breach of fair procedures in relation to the PIP, the Adjudication Officer noted that: “It is not standard practice that the full panoply of fair procedures afforded in the context of a disciplinary procedure apply in regard to the conduct of a PIP.” A PIP meeting was held

However, the Adjudicator regarded the pivotal question to be whether the effect of the interactions between the Complainant and the Respondent at the meeting on 3rd October 2023, at which the Complainant was offered the exit package, “crossed a threshold so as to damage the relationship to such an extent that it was reasonable for the Complainant to resign.” 

The Adjudicator noted that although various aspects of the meeting of 3rd October were in dispute, it was agreed that the meeting in fact took place and that two months’ notice and €5,000 (ex-gratia) were offered. The Adjudicator regarded this as “the defining moment where the employment relationship between the Complainant and the Respondent was unequivocally and unambiguously damaged by the undisputed action of the Respondent.” 

The Adjudicator found that the Respondent’s conduct in and around its decision to offer the Complainant an exit package only three working days after she had been placed on a PIP was an action taken by the Respondent “which any reasonable person would consider to be so serious or significant that it goes to the root of the contract of employment between the employer and employee.” The Adjudicator found that the Complainant met the contract test and the reasonableness test, and that the Respondent had breached both tests.

The Adjudicator was satisfied that the Complainant’s failure to raise a grievance was not fatal to her complaint, noting that there was no grievance procedure in either the Complainant’s contract of employment or the employee handbook. There were no internal remedies available to her. The Adjudicator regarded this as a “striking omission” and referred to S.I. No. 146/2000 – Industrial Relations Act 1990 (Code of Practice on Grievance and Disciplinary Procedures) (Declaration) Order 2000, which provides that employers should have written procedures for dealing with grievance issues and disciplinary issues.

The Adjudicator found that the Complainant was unfairly dismissed and decided that compensation was the appropriate form of redress. The Complainant calculated her actual loss to be €48,548.55, but the Adjudicator was not satisfied with the efforts made by the Complainant to mitigate her loss, and she awarded the Complainant €17,917.50 for the constructive unfair dismissal.

Practical Tips

All of this does not mean that an employer can never have an exit conversation with an employee. However, the timing and context of such conversations is vitally important, and it is important for employers to appreciate that just because something is labelled as “without prejudice” and/or “off the record” does not make it so.

There are always legal risks attached to making a without prejudice offer to an employee to terminate employment. Protected conversations can be introduced as evidence before the Workplace Relations Commission or a Court and could be used to argue that any future dismissal was predetermined. Risks are further increased if there is a history of performance or conduct issues with the employees which predate the offer. So employers who decide to proceed with such conversations must do so in the knowledge of the risks attached and should only do so after balancing the risks.

Where it is the employee who approaches the employer with a proposal for an exit, the employer might be in a position to consider that proposal. However, if the proposal emanates from the employer, and the proposal is rejected by the employee, it can taint any future termination process involving that employee. Any future attempt to exit the employee through a valid process could be deemed tainted by an earlier conversation, whether the parties had labelled it protected or otherwise.