Performance management is always a challenge for employers.  Termination for cause on the basis of poor performance is trickier.  The recent decision of Cottrill v. Utopia Day Spas and Salons Ltd., 2017 BCSC 704 (“Cottrill”) is a good reminder of the importance of proactive and proper performance management, especially for underperforming employees.

Ms. Cottrill was a skincare therapist.  Throughout her employment, she attended regular goal setting meetings with her supervisor and was subject to performance reviews.  When her supervisor left the company in 2015, the President and CEO determined that she had regularly failed to meet her goals.  In the eleven years prior to this review, none of the management staff had reported any concerns about Ms. Cottrill’s performance.  The employee was told that she had “one more chance” to improve her performance and given a list of expectations to meet going forward.  The company set up coaching sessions between the employee and her new supervisor.  She was given a letter setting out her performance deficiencies and warning her that the company expected “marked improvement”, effective immediately.  She was told if she failed to meet the expectations in the next three months, her employment would be terminated for cause.

Over the next three months, the employee increased her call backs, service revenue, retail sales, number of requests and new guests.  Despite the improvement, her supervisors rated her as not “successful” and claimed that it was clear her performance was not going to improve.  Ms. Cottrill’s employment was terminated at the end of the three months.  She was not given a letter confirming her dismissal and she was not paid any severance.  Ms. Cottrill sued and alleged that she had been wrongfully dismissed.

At trial, the employer argued that Ms. Cottrill’s employment was terminated for cause due to her failure to meet the required performance standards, and because of her bad attitude.  Ms. Cottrill argued that she had not been given a meaningful opportunity to improve her performance and that she had been effectively set up to fail by the employer’s expectations.  The Court agreed and found that prior to 2015, Ms. Cottrill had not been adequately warned that her employment was in jeopardy and in fact, her prior performance reviews indicated that she was performing well.  The Court found:

  • the employer set unreasonable and unfair performance standards, which the employee had not been held to previously;
  • the employee was not given a reasonable opportunity to improve her performance; and
  • the employee was not told why her attitude was deficient or why the employer believed it had cause for her dismissal, and she was not given a chance to respond to these allegations.

To address procedural and substantive aspects of performance management employers should:

  1. establish objectively reasonable performance standards and communicate expectations to employees;
  2. provide supervisors and managers with proper training on these standards, and make sure they complete performance reviews regularly and accurately for their direct reports;
  3. promptly advise underperforming employees if and when they are not meeting expectations;
  4. provide underperforming employees with a clear warning that their employment is in jeopardy; and
  5. give underperforming employees a reasonable opportunity to improve their performance before terminating their employment.

Cottrill also highlights the importance of acting fairly in the manner of dismissal.  Failure to do so can significantly increase an employer’s liability for damages.  Ms. Cottrill’s employment agreement included a clause which limited her entitlement to notice of termination/pay in lieu to the minimum amounts set out in the B.C. Employment Standards Act.  As such, she was only entitled to eight weeks’ severance pay.  However, due to a finding of bad faith conduct in the manner of dismissal, Ms. Cottrill was awarded an additional $15,000 in aggravated damages.

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