The Legal Implications of Performance Improvement Plans in Employment Disputes: A Case Analysis.

Abstract:

This article delves into a recent labor dispute case, James Odong Versus Airtel Uganda Ltd, which revolves around the contentious issue of Performance Improvement Plans (PIPs) and the termination of employees based on poor performance. It also addresses the right to payment in lieu of leave as granted under the Employment Act 2006, emphasizing that this right is subject to employer discretion regarding when leave can be taken. The ruling by the Industrial Court in this case carries substantial implications for both employers and employees, offering insights into the legal principles governing PIPs and employment termination in Uganda. The article delves into the case's factual background, the legal issues at hand, and the court's verdict, providing an in-depth analysis of the legal framework surrounding PIPs and their relevance in employment disputes.

Additionally, it presents a comparative analysis of judicial precedents cited by the court in arriving at its decision in the mentioned case. This case serves as a pivotal reminder to both employers and employees to ensure compliance with applicable labor laws when addressing labor disputes.

Introduction

On October 24, 2023, a landmark judgment was handed down by the Industrial Court Presided by the Head Judge Linda Lillian Tumusiime Mugisha in the case of James Odong v. Airtel Uganda Ltd, identified as Labour Dispute Reference No. 210 of 2018 arising from Labour Dispute No. 143 of 2018. This case revolved around the termination of the claimant, James Odong, and the court's interpretation of the purpose and legality of Performance Improvement Plans (PIPs) within the context of employee performance and termination. The case has significant ramifications for both employers and employees, offering insights into the fairness and legality of PIPs.

Factual Background

James Odong, the claimant, was employed by Airtel Uganda Ltd as a Regional Business Manager in the sales and distribution department. He joined the company on a probationary basis in February 2016 and was confirmed as a permanent employee in April 2017. Odong claimed that he diligently fulfilled his job responsibilities and played a vital role in the consistent growth of the Northern region's market share. However, in January 2018, he was placed on a PIP. The introduction of directives by the Uganda Communications Commission (UCC) in February 2018 negatively impacted the Northern region's sales, affecting Odong's ability to meet the PIP's performance targets.

Subsequently, Odong was invited for a feedback review session with the Human Resource Manager on April 20, 2018, during which he was informed of his termination for poor performance. He was handed a termination letter dated April 19, 2018, despite receiving a recommendation letter indicating that his performance was satisfactory.

Airtel Uganda Ltd, the respondent, argued that Odong struggled to meet key performance indicators, leading to his placement on a PIP. The PIP was mutually agreed upon, and monthly performance assessments were conducted. However, Odong consistently fell short of the set 100% performance target. Following a final review at the end of the PIP period, the decision to terminate Odong's employment was based on grounds of poor performance.

Issues before the Court

The Industrial Court addressed two pivotal issues in this case:

1. Whether the termination of the claimant's employment by the respondent was illegal.

2. What remedies are available to the claimant?

The Court's Decision on Issue 1

Court held that employers have the discretion to terminate employees for various reasons, including poor performance, as long as they adhere to the appropriate termination procedures as outlined in the Employment Act, 2006

"It is a settled position of the law that employers are at liberty to dismiss their employees for any reason including, grounds of poor performance so long as they follow the correct procedure for termination as laid down under sections 58,65,66,68 and 73(6) the Employment Act, 2006. (see Hilda Musinguzi vs stanbic Bank (U) Ltd (SCCA 005/2016).

The Court observed nevertheless, that the law does not explicitly define what constitutes a fair and objective performance management process, especially concerning addressing poor performance. Consequently, the court is tasked with determining whether the process was fair, consistent, and objective.

The court cited George Ogembo's book, "Employment Law, Guide for Employers," which underscores the importance of fairness, objectivity, and consistency in performance appraisals. The process must be credible, verifiable, and align with the terms of the employment contract. Furthermore, it should involve active participation of the employee, with opportunities for the employee to present their views and question the basis of the supervisor's conclusions. On Page 10 at Para 189 of this fruitful Judgement I quote,

"Performance Management is an everyday human Resource routine function in the workplace. It is during this process that behaviors and outcomes are closely monitored and re-measured against present and past goals.”

This in our considered view is done by appraising the performance of an employee against the set terms of service in the contract. He cites the definition of Appraisal as defined under the Concise Oxford English Dictionary, 12" edition, as. “a formal assessment of the performance of an employee.”

According to him in conducting a performance Appraisal the elements of fairness, objectivity and consistency should be emphasized. The process must be credible and verifiable. The Performance standard set must be reasonable, understandable, verifiable, measurable, equitable and achievable and the appraisal must be done within a defined policy framework to ensure substantive participation of the employee and when conducting the evaluation, there must be cooperation between the employer and the employee.

Where there is disagreement the employee must be given opportunity to present his or her views and supervisor must justify his or her conclusions regarding the employee’s performance, otherwise the performance appraisal would be considered unfair. He cited Jane Wairimu Machira Vs Mugo Waweru and Associates ELRC Cause No. 621 of 2012, Cited by Ogembo(supra)in which Nzioki, J held that:

“...The performance of an employee must involve active participation of the employee. A credible performance appraisal process must evidently be participatory. A comment made by the supervisor without the participation of an employee cannot pass for performance appraisal. Even where there may be disagreement between an employee and their supervisor on the verdict of a performance appraisal, the disagreement must be documented to show that the appraisal did indeed take and

John Retemo Ondieki vs Islamic Relief World widew, RLRC,cause No. 1422 of 2012 where Ndolo J, held that, "if the employer decides to take, place... the side of the supervisor without affording the employee an opportunity not only to present their view but also to question the basis of the supervisor’s conclusions then the appraisals process is compromised and its results cannot be used as a basis for disciplinary action against the employee. To rule otherwise would be to hand performance appraisal as a blunt weapon in the hands of overzealous supervisors against employees they do_not_like...”(emphasis ours) He concluded that:

The court emphasized that a PIP is a tool designed to progressively and consistently monitor employee performance with the goal of improvement, not as a means to facilitate termination. An objective PIP must include specific expectations, action plans, resources for improvement, and clear consequences for continued poor performance.

I quote as follows under Para 225 of the Judgement;

"Performance Improvement Plan(PIP “Js a tool for progressive and consistent monitoring of employee's performance once found to be below expectations with the aim of addressing unsatisfactory performance issues. It also provides avenues through which struggling employees can engage with the management in developing strategies aimed at improving performance. ...

hence if upon the conclusion of a performance appraisal, process an employer is of the view that an employee's performance ought to be closely monitored for improvement, it should document Performance issues and proceed to place the employee on a PIP(emphasis ours).

A PIP is a corrective action tool.,...the primary aim is of improving and not as a veil or conduit to dismiss an employee. According to him an objective PIP must have the following elements:

a) Explain the deficient performance and why it needs to be corrected,

b) Provide specific expectations and describe the desired performance I either quantitative or qualitative terms; the standard should be S.M.A.R.T(Specific, Measurable ,attainable, Relevant and Timely)

c) Develop an action plan that also follows §.M.A.R.T guidelines. Timelines shall be set based on areas of improvement cited and v=severity of performance deficits (PIP timelines are usually 30,60, 90 days in duration.

d) Allow reasonable time to resolve the deficient performance and establish periodic review dates.

e) Describe the resources available to assist the employee including coaching or training where necessary to meet objectives.

f) Allow for an objective periodic performance review of performance will be monitored or reviewed.

g) Notify the consequences of continued deficient performance. Example :

“Further disciplinary action up to and including termination, will be necessary if performance does not improve or if performance does not improve or if performance issues arise.’

In summary the process must be fair, reasonable, consistent and objective.

This court in Tamale Musisi Rita vs Airtel Uganda Limited LDR No. 183/2017 and Martin Imakit vs Vivo Energy (U) Lttd LDC No. 034 of 2017, emphasized that an employer must have justifiable cause for subjecting an employee to a PIP process, and before doing so, there ought to be adequate preparation, including conducting face to face meetings between the concerned employee and his or supervisor to explain the process. Both the employee and his or her supervisor should sign the PIP agreement and it must provide for consistent and timely feedback to the employee regarding his or her progress. It should indicate the source of additional Support or resources necessary for the employee to meet the objectives of the PIP and most importantly it must clearly document the areas which require improvement, and the expected outcomes. It must therefore clearly state the targets to be achieved within the PIP period. Although this court in Stanbie Bank V Twinomuhangi Labour Dispute Appeal 21 of 2020, was of the proposition that the court should not delve so much on the assessment process that was undertaken during a PIP process, we believe that it important to make an analysis of the process in order to determine that the PIP complied with the elements of fairness, reasonableness, objectivity and consistency.

In summary, the court concluded that a PIP should be a tool for improving an employee's performance, not a veil for termination. The process must be fair, reasonable, consistent, and objective, with clear documentation of areas needing improvement and expected outcomes.

Important to note that the panel contrasted the decision of In Rita Tamale(supra) this court emphasised that:

“Where the employee fails to meet the PIP, he or she must be given an Opportunity to explain through a Jair hearing, before taking disciplinary action including termination...”

This was not the case in the instant case.

It should be remembered that, a PIP is intended to assist the employee to improve therefore the Employer must be seen to make every effort to assist and not fail or frustrate the employee in pursuit of improving performance and where he or she fails to meet the PIP, it is mandatory that the employee is subjected to a disciplinary hearing which clearly explains the areas of failure and as provided under section 68, the employer “... shall prove the reason or reasons for the dismissal, and where the employer fails to do so the dismissal shall be deemed to have been unfair within the meaning of section 71 (2) of the Employment Act 2006 The reason or reasons for dismissal shall be matters, which the employer, at the time of dismissal, genuinely believed to exist and which caused him or her to dismiss the employee...”

The Court's Decision on Issue 2

Given that the termination of Odong's employment was deemed unlawful due to a flawed PIP process, the court proceeded to address the available remedies. The claimant sought several remedies, including a declaration of the unlawfulness of his termination, payment of salary arrears, and payment in lieu of leave.

Regarding payment in lieu of leave, the court referred to Section 54 of the Employment Act, 2006, which entitles employees to annual leave with full pay. However, the timing of leave should be agreed upon by both parties, with the employer having the discretion to determine when it is taken. To claim payment in lieu of leave, an employee must prove that they applied for leave, and it was denied. In this case, Odong did not provide evidence of denied leave requests, and thus, his claim for payment in lieu of leave was denied.

I quote under Para 473 of the Judgement,

"That although Sect 54 of the Employment Act 2006 entitles an employee to leave as of right he or she cannot exercise it absolutely, the employer reserves the managerial prerogative therefore he or she has the mandate to determine when an employee should take leave. Section 54(1)(a) provides that it shall “...be taken at such time during such calendar year_as may be agreed between the parties.

Although an employee would be entitled to leave pay in the event of termination before the same is taken, he or she has the obligation of proving that he or she applied for leave and it was denied. This because the employer as the determinant of his or her organisation operational requirements, and as the controller of capital he or she has the right to organize his organisation to ensure continuity and orderliness hence the requirement for the parties to agree on the dates on which the leave must be taken.

Although in Mbika it was this court’ s view that once the leave falls due and it is taken even without the express agreement between the parties, it was still emphasized that for such an employee to succeed, in a claim for leave pay, he or she must prove that he or she did apply for the leave and it was denied by the employer. The Claimant in the instant case did not adduce any evidence to show that he applied for leave and it was denied. In the circumstances we had no basis to award him pay for leave untaken.'

In Summary the Key Takeaways:

1. A Performance Improvement Plan (PIP) should be a fair, reasonable, consistent, and objective process aimed at helping employees improve their performance.

2. Employers should ensure that PIPs are well-documented, with specific expectations, measurable goals, and a clear action plan for improvement.

3. Employees placed on a PIP must be provided with adequate support and resources to help them meet the PIP's objectives.

4. If an employee fails to meet the PIP's targets, they should be given an opportunity for a fair hearing before any disciplinary action, including termination, is taken.

5. Employers should act in good faith and not use PIPs as a pretext to terminate employees without proper justification.

6. When an employee placed on a Performance Improvement Plan (PIP) fails to meet its objectives, the employer should provide an opportunity for the employee to explain through a fair hearing before taking any disciplinary action, including termination. This ensures a fair and transparent process.

7. A PIP is intended to assist the employee in improving their performance, and the employer is obligated to make every effort to support the employee in their pursuit of improvement.

8. If an employee fails to meet the PIP goals, it is mandatory that the employee is subjected to a disciplinary hearing, as provided under Section 68 of the Employment Act, 2006. The employer must clearly explain the areas of failure, and the reasons for dismissal must be genuinely believed to exist at the time of dismissal.

9. Payment in lieu of leave is subject to agreement between the parties, and the employer has the discretion to determine when annual leave is taken. To claim payment in lieu of leave, an employee must provide evidence that they applied for leave, and it was denied. In the absence of such evidence, the claim for payment in lieu of leave may be denied.

In summary, these key takeaways emphasize the importance of fairness, transparency, and due process in handling employee performance improvement and termination processes. Employers should aim to support their employees in their performance improvement efforts and ensure that any disciplinary actions are justified and well-documented. Employees should be aware of their rights and responsibilities in such situations and provide necessary evidence when making claims related to their employment rights.

Possible Solutions for Employers and Employees:

For Employers:

1. Implement clear and transparent PIP processes that focus on helping employees improve their performance.

2. Ensure that employees are provided with the necessary support and resources to meet the PIP's objectives.

3. Maintain open communication with employees throughout the PIP process and provide regular feedback.

4. Conduct a fair and objective assessment of the employee's performance at the end of the PIP period before making any termination decisions.

5. Ensure that all termination decisions are based on justifiable cause and follow proper procedures.

For Employees:

1. If placed on a PIP, actively engage in the process and work towards meeting the PIPs objectives.

2. Seek clarification and support from your supervisor if you have concerns or face challenges during the PIP period.

3. If you believe the PIP process is not fair or that you have been wrongfully targeted for termination, consult with legal counsel and consider pursuing a legal remedy.

The court's decision in this case underscores the importance of fair and objective performance management in the workplace. Employers and employees should work together to create a conducive environment that allows employees to improve their performance and grow within the organization, rather than using PIPs as a means to unjustly terminate employees.

Conclusion

The James Odong v. Airtel Uganda Ltd case serves as a crucial precedent for understanding the legal and procedural aspects of Performance Improvement Plans in the employment context. The court's decision underscores the importance of fairness, objectivity, and consistency in PIPs, emphasizing their role as tools for improving employee performance rather than as mechanisms for termination. Employers must ensure that PIPs are transparent, participatory, and focused on assisting employees in achieving performance goals. The case also highlights the need for proper documentation and adherence to employment laws when addressing poor performance and initiating disciplinary actions. Further in regards to Payment in leu of leave as a right provided under the Employment Act 2006 this right is not absolute and employers have the final say as and when this should be taken by their employees.

By Waboga David (Law Development Centre Student Academic Yr 2022/2023)

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Disclaimer!!! This article is provided for informational purposes only and should not be considered as legal advice. It is important to consult with a qualified attorney for advice regarding your specific legal situation. Laws and regulations may change, and this article may not reflect the most current legal standards or interpretations. The information provided in this article is based on the knowledge available as of the publication date of the decision (Oct 24th 2023), and it may not reflect subsequent developments in the law