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Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

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employment

What happens if you fail a PIP?

Key Takeaway

Failing a Performance Improvement Plan (PIP) can lead to dismissal in New Zealand. Employers must act in good faith and follow a fair process, giving employees genuine opportunities to improve and a right to representation. If unfairly dismissed, employees can raise a personal grievance.

What Happens if You Fail a Performance Improvement Plan (PIP)?

In New Zealand employment law, a Performance Improvement Plan (PIP) is a structured process used by employers to address an employee's unsatisfactory work performance. If an employee fails to meet the required standards outlined in a PIP, it can have significant consequences, potentially leading to dismissal. However, employers must adhere to strict legal requirements regarding good faith and procedural fairness throughout the entire process.

The Legal Framework: Good Faith and Fair Process

The foundation of New Zealand employment law is the principle of good faith – meaning parties to an employment relationship must be active and constructive in establishing and maintaining a productive relationship, and be responsive and communicative [Source: Employment Relations Act 2000, s 4(1A)]. This obligation applies to both employers and employees throughout the performance management process, including the implementation and review of a PIP.

Any decision by an employer, including dismissal for unsatisfactory performance, must meet the test of justification. This means that the employer's actions must be what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred [Source: Employment Relations Act 2000, s 103A]. This test applies to both the reasons for the employer's action (substantive justification) and the way the employer carried out that action (procedural fairness).

Key Elements of a Fair PIP Process

For an employer's actions regarding a PIP and any subsequent dismissal to be considered justified, the process generally involves:

  • Clear Expectations: The employer must clearly communicate the performance standards, how the employee is falling short, and what improvements are expected. These expectations should be reasonable and achievable.
  • Opportunity to Improve: The employee must be given a genuine opportunity to improve their performance. This includes providing adequate time for improvement and setting clear, measurable goals within the PIP.
  • Support and Resources: The employer has an obligation to provide appropriate support, training, and resources to help the employee meet the required standards. This might involve additional training, coaching, or adjusting workloads if appropriate.
  • Opportunity to Respond: The employee must be given the chance to respond to any performance concerns raised by the employer, explain their situation, and provide their perspective before any decisions are made [Source: Employment Relations Act 2000, s 103A].
  • Regular Feedback: Ongoing and constructive feedback should be provided throughout the PIP period, monitoring progress and adjusting support as needed.
  • Consideration of Alternatives: Before deciding on dismissal, a fair and reasonable employer should consider any reasonable alternatives to dismissal.

Consequences of Failing a PIP

If an employee fails to meet the required performance standards after a fair and reasonable PIP process, the employer may consider dismissal for unsatisfactory performance. However, even if the performance issues are genuine (substantive justification), the dismissal can be found unjustified dismissal – a dismissal that a fair and reasonable employer could not have made in all the circumstances at the time the dismissal occurred – if the employer did not follow a fair process [Source: Employment Relations Act 2000, s 103A]. This highlights the critical importance of procedural fairness.

Employee Rights and Remedies

An employee facing a PIP or potential dismissal has several important rights:

  • Right to Representation: Employees have the right to have a representative (e.g., a union delegate, lawyer, or family member) present at any meeting where decisions are being made about their employment, or where their employment is at risk [Source: Employment Relations Act 2000, s 4(1A)]. This right is part of the employer's good faith obligations.
  • Raising a Personal Grievance: If an employee believes they have been unjustifiably dismissed, or disadvantaged by the employer's actions during the PIP process, they may raise a personal grievance – a claim made by an employee against their employer for an alleged unjustifiable dismissal, disadvantage, discrimination, harassment, or other breach of their employment agreement or statutory rights [Source: Employment Relations Act 2000, s 103].
    • Generally, a personal grievance must be raised with the employer within 90 days from the date on which the action giving rise to the grievance occurred or came to the employee's attention [Source: Employment Relations Act 2000, s 114].
  • Remedies: If a personal grievance for unjustified dismissal is successful, the Employment Relations Authority or Employment Court may order various remedies, including:
    • Reinstatement: Returning the employee to their former position or a position no less advantageous.
    • Reimbursement of Lost Wages: Payment for wages lost as a result of the unjustified dismissal.
    • Compensation: Payment for humiliation, loss of dignity, and injury to feelings [Source: Employment Relations Act 2000, s 123].

When to Seek Independent Legal Advice

Individuals involved in a Performance Improvement Plan, or facing potential dismissal, are strongly encouraged to seek independent legal advice. Information provided by legal professionals, unions, or organisations like Community Law Centres can help individuals understand their specific rights and obligations, and navigate complex employment situations.

Key Resources