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Out with the old: Can we retire an underperforming older worker?
I am the HR manager of a company specialising in IT support. In 2011 we scrapped our company retirement age of 65 because we do not think we would be able justify having one. Since then a number of our employees have continued working past the age of 65 and on the whole we believe this is having a positive impact on the business.
However, I am very concerned about one particular employee, called Doris, who is 67 years old. She has been with the company for over 30 years and has previously been a star performer but her performance has deteriorated of late. Doris is making too many mistakes in her work, she is very slow to learn how to use new IT software and she refuses to attend networking events because she says she gets tired easily and hasn’t got enough energy to mingle with our clients. Despite this, Doris loves her work and has told me on several occasions that she plans to continue working into her 80s.
I am coming under pressure from our CEO to get rid of her because, as he puts it, “Doris’s glory days are clearly behind her”. Do I have to performance manage Doris out? How do I do this without exposing the company to expensive age discrimination claims? Can't I just tell her its time for her to retire?
Mr G Reaper
Dear Mr Reaper
Although this is not an easy situation, you ought to manage Doris’s poor performance in the same way as you would manage performance issues with any other employee, irrespective of their age.
Retirement is no longer a fair reason to dismiss
Ending an employment because an employee has reached a certain age is potentially unlawful and discriminatory. Whilst it is acceptable to discuss Doris’s future plans with her as part of regular workplace discussions, telling Doris that she must retire is discriminatory.
Compensation for discrimination is uncapped but based primarily on net loss of earnings. Where the act of discrimination has resulted in the loss of a job, or the loss of future earnings prospects, damages may be high, particularly if the employee struggles to find a new job or the same level of pay and benefits.
Don’t ignore poor performance
Failing to performance manage Doris in fear of it being humiliating due to her age may expose the company to complaints from other employees who feel that she is being unfairly favoured. Failure to address poor performance in older workers but addressing it in younger workers may give the younger workers scope to bring a claim for age discrimination – remember the law doesn’t only protect older workers!
Capability is a potentially fair reason to dismiss
Since the abolition of the default retirement age, in order to dismiss an older employee fairly and without liability for age discrimination, an employer should (as for all other (younger) employees) dismiss only for reasons related to the employee’s capability, conduct, because the employee is redundant or for another sound, good business-related reason. Therefore, if an employer wants to dismiss an older employee because of performance concerns (as is the case with Doris), in order to avoid liability they should in most cases follow a performance management process, even if this is seen as an undignified way to end a long career.
There is a risk a tribunal unconvinced of the genuineness of the performance concerns or the seriousness of the same might draw an inference that other factors were behind the desire to dismiss, e.g. Doris’s age. You should therefore ensure that the performance concerns are clearly documented in order to rebut such inferences.
For a procedure conducted prior to Doris’s dismissal to be fair you should investigate the poor performance; explain to Doris how and why you believe she is falling below the required standard; allow Doris to comment; and, importantly, give her a reasonable opportunity to improve before deciding to dismiss.
If you were to dismiss Doris today on the basis of her lack of capability without due warning and without giving her an opportunity to try to improve, an Employment Tribunal would likely consider that you had failed to follow a fair procedure and would therefore be likely to award compensation (up to the current maximum of £74,200) on the basis that the dismissal is unfair .
It is always open for an employer to circumvent a performance process in these circumstances and to offer compensation in return for a swift and managed exit and a waiver of possible claims under a settlement agreement. Whether an employee accepts an offer often depends on the generosity of the sum offered. Most people have their price.
If Doris is amenable and does not allege that she is being discriminated against, then this would offer Doris a dignified exit and avoid the need to performance manage her.
Top tips for avoiding these problems in future
- It is important to have regular conversations with all employees about your expectations of them, their performance and future plans.
- Avoid falling into the stereotype based on age.
- Tackle poor performance head-on: failing to do so exposes the company to risk of claims not to mention the cost of ‘carrying’ an ineffective employee.
- Introduce a retirement policy summarising your approach to the issue and explaining how employees might voluntarily retire.
For more information please contact a member of the HR Law team.