Key takeaways
Performance management must relate to current roles and responsibilities
Employee need only be competent in their current role.
Promotion readiness not a capability issue
Lack of promotion potential cannot justify a capability-based dismissal.
Tribunal erred in approach to disability and Polkey deduction
The tribunal had misapplied the relevant legal tests.
The EAT recently overturned an employment tribunal’s decision due to errors in its approach to disability discrimination and assessing compensation and, in doing so, offered important guidance on whether a lack of promotion readiness is a performance management issue.
Legal background
There are five potentially fair reasons for an employee’s dismissal: incapability; misconduct; redundancy; contravention of a duty or restriction; and some other substantial reason. To dismiss fairly for one of those reasons, the employer must first follow a fair procedure. What a fair procedure entails will depend on the reason and all of the circumstances.
If a dismissal is procedurally unfair, a claimant’s compensatory award may be reduced or limited (known as a ‘Polkey deduction’) to reflect the chance that they would have been dismissed in any event and that the employer's procedural errors accordingly made no difference to the outcome (Polkey -v- AE Dayton Services Ltd [1987] IRLR 503).
Factual background
P, a manager for a professional services business, had been dismissed for not progressing / lacking promotion readiness. Her employer adopted an ‘up or elsewhere’ approach to performance management, which required its staff to show continual progression and promotion readiness. A failure to demonstrate continuous improvement was considered to be poor performance and it was purportedly on this basis that P had been dismissed. Following her dismissal, P brought various claims including unfair dismissal and disability discrimination (based on her diagnosis of endometriosis).
The employment tribunal held that P’s dismissal was procedurally unfair but applied a 100% Polkey deduction. The tribunal also rejected the claim for disability arising from discrimination. P successfully appealed to the EAT.
EAT decision
The EAT upheld P’s appeal and overturned the tribunal’s decision due to errors in its approach to disability discrimination and the assessment of a Polkey deduction. A fresh tribunal will need to consider P’s claim.
In doing so, the EAT also offered important guidance on whether a lack of promotion readiness is a performance management issue. The EAT clarified that a ‘capability’ dismissal can only relate to the work or role that the employee is currently contractually employed to do. A lack of capability, and therefore a performance management process, cannot be applied as a reason to dismiss if this relates to the employee’s future potential to do a different sort of work / role (i.e. because of their lack of readiness for promotion). Depending on the circumstances, a lack of promotion readiness might instead fall within the scope of 'some other substantial reason’ to dismiss.
