Nonstandard Performance and Unfair Termination

Nonstandard Performance and Unfair Termination

A Company or business that employs a senior manager or a skilled foreigner, will likely pay wages and special welfare benefits which are greater than that of regular employees, such benefits may include a company car with driver, international health/ life insurance or the provision of a residence such as an apartment or house. Moreover, in order to safeguard the interests of the business/company, an employer will normally make a written employment contract with such employee(s) that covers various key details including term of employment, remuneration/ benefits and the job responsibilities of the employee.

Given that the employer agrees to pay these high benefits, they often expect that such employees will have special skills & experience that will help to improve the profitability and efficiency of the company/business. However, as we shall discuss below, sometimes the performance of these highly paid staff falls below these expectations and that is where issues concerning termination can arise.

If an employee is on a fixed term contract and they perform their work to the expected standard their employer will likely extend or renew their employment contract. However, if an employee performs in an unsatisfactory manner for such reasons as:

i.Performing their job responsibilities below the required standard; or

ii.Displaying a disruptive personality (i.e. Stubborn, aggressive or egotistical nature),

then their employer will usually classify such staff as ‘underperforming’. In such cases if the employer would like to terminate the employment contract, an issue arises as to what compensation the employer will need to pay the employee.

Should an employer terminate the employment contact of an employee due to the staff members’ underperformance it shall not be deemed that the employee has violated the work rules nor the labor law. Therefore, the employee will be entitled to receive the following benefits:

1. Severance Pay – The amount of severance pay to be paid to the affected employee will depend upon the amount of time which the employee worked for the employer. For instance if the employee works for one hundred and twenty (120) days and is then terminated for underperformance they shall have the right to receive thirty (30) days of severance pay. If however, the affected employee has worked for the employer for more than ten (10) years they shall be entitled to three hundred (300) days of severance pay.
2. Wages in Lieu of Advance Notice – According to the law, an employer must give the employee advance notice of their termination of at least one (1) payment period. However, an employer can instead have the employee stop their performance immediately subject to them paying the employee their wage in lieu of the required advance notice.
3. Unused Annual Leave – An employer must also pay the terminated staff member in respect to all unused annual leave which has been accrued in the year of their termination.
4. Work Guarantee – The employer must also refund to the terminated staff member their work guarantee money they have provided to their employer (if applicable);
5. Provident Fund – The employees’ Provident Fund contributions (if any) must be paid out to the employee according to the terms & conditions of the Provident Fund’ governing rules; and
6. Other Monies – The employer will also have to consider on a case by case basis whether the employees’ employment contract or any work’s rule, announcement, regulation, relative order provide for any other types of benefits for terminated employees.

With regard to the benefits stated in 1 – 6 above, an employer usually pays these monies to an affected employee with few problems arising as these benefits are clearly stipulated according to the law. However, there is another type of benefit that may be available to the employee whom the Labor Court will solely determine; this is the compensation for unfair termination.

Damages of unfair termination refers to situations where an employer terminates an employees’ employment contract without reason or for an inadequate or unnecessary reason.

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Examples of reasonable causes whereby an employer can terminate the employment of a staff member without attracting a damages claim for unfair termination include the following reasons:

–An employee’s work performance is substandard as compared to other employees in the same position;

–An employee breaches an employer’s policy;

–An employee constantly lacks perseverance when undertaking their work;

–An employee fails to attend several executive meetings (despite invitations);

–An senior employee failing to develop a product or service which is required under their job responsibilities;

–An employee failing to comply with a valid order/ directive from their CEO;

–An employee failing to achieve a sales volumetarget; and

–Failure to take due responsibility when performing work.

The key issue which an employer must carefully consider in order to avoid a successful unfair termination compensation claim is whether the reason used to justify the termination is reasonable enough. This issue is quite abstract and can depend on several factors including the employees past performance, their skills and qualifications and the circumstances of the case. Employers should note that if they cannot specify a clear reason to justify their decision to terminate or if the terminated employee can provide sufficient evidence to undermine an employer’s witness (es) (if any) or their case, then they will likely be unsuccessful in defending this type of law suit in the Labour Court.. For example, in case of a termination based on failing to achieve a sales volume target, if an the employee is required to achieve a particular sales volume target which they fail to achieve due to factors which are beyond their control then the employer cannot utilize this failure in order to reasonably justify the termination of the employee.

In cases involving termination of staff we suggest that, both parties should review the provisions of the employment contract to see whether there is an accommodation to allow the employer to use such reasons to terminate an employment contract. That is to say, if there is such an accommodation then the employer shall be entitled to terminate the employment contract with fairness. For instance, if an employer specifies a clear procedure for terminating an employee in its work’ rules or the employment contract which requires the appointment & review of an investigative committee before a termination can be effected and the employer subsequently fails to comply with this procedure and then terminates the employee, then such termination will likely be considered as an unfair termination by the Labour Court.

Nevertheless, if there are no conditions or termination procedures in an employment contract or the work rules, an important issue to be determined is whether an employee has performed their work to a satisfactory standard. Most employers assess an employee’s work performance and such staff performance assessments are usually done on an annual or bi-annual basis. If an employee’s performance falls slightly from previous assessments but is still at a satisfactory level, the employer shall not be permitted to find that the employee’s performance is substandard. For example if an employee is assessed over several years as having superior performance but is then terminated for only achieving a performance level of ‘good’ in a particular assessment period, such justification will almost certainly be considered as an ‘unfair justification’ which will enable the terminated staff member to sue their employer on the grounds of unfair termination.