Capability in the workplace: How to handle poor performance and ill health

Gemma O'Connor - Head of Service

April 04 2024

Your employees are human; just like everyone, on occasion, their work performance may dip.

If this becomes an ongoing issue, an informal chat with the employee can often help shed some light on what may be affecting their ability to complete their duties.

Once the cause is identified and the employee receives relevant support, their performance will hopefully improve. After this, no further action will be necessary.

However, if this informal approach does not work, it may be time to address the employee’s capability to do their job.

What is capability?

Capability in the context of employment law refers to an employee's skill, aptitude, health, or any other physical/mental quality that allows them to complete their duties. Employment law recognises that employers may need to dismiss staff who no longer have the capability to complete their work.

A way to understand whether an employee's poor performance may be due to their capability is to ask yourself if they cannot do the work. If, instead, they will not do the work, this may instead fall under the category of conduct.

Capability policy

A capability dismissal may be lawful if an employee does not have the capability, competence, or qualifications to perform the work which they are employed to do.

The purpose of a capability policy is to clearly set out how the business will address capability issues that arise in the workplace.

Firstly, you will need to take steps to support your employees to work effectively. An informal discussion with the employee will often prevent the need for formal disciplinary action. A mutually agreed performance management solution should be explored first to help the employee overcome any capability issues.

Performance-related capability dismissal

The test to determine whether a dismissal related to employee competency is fair is like the procedure used for misconduct:

  • Do you believe that the employee is not capable of carrying out the job?
  • If so, do you have reasonable grounds to support that belief?

The procedure you follow to establish the basis for the dismissal must comply with the rules of natural justice and the terms of your written disciplinary procedures.

There is one key difference in competency cases, however. You must outline the nature of the performance issues that you need the employee to improve upon.

Before moving to dismiss on the grounds of competence, you must first highlight the performance issues to the employee and grant them an opportunity to improve. With the right training and support, the employee may turn things around.

Medical capability dismissal

In many cases, the incapability of an employee to continue performing their job may result from ill health.

Even if that ill health was caused by the conduct of the employer, dismissal will not necessarily be unfair, although it may also mean that the employer should take greater steps to avoid dismissal than would otherwise be the case.

Before dismissing someone on the grounds of medical capability, you should obtain detailed medical evidence confirming that the employee’s return to work or recovery is unlikely.

In case there’s a conflict between the medical evidence presented by two parties in relation to the date of return to work, you will need the independent medical opinion of a third party before confirming a capability dismissal on the grounds of poor health.

A dismissal based on medical capability must follow the principles of natural justice. You should:

  • Make sure you’re in full possession of all material facts concerning the employee’s condition.
  • Ensure the employee receives fair notice that the question of a medical capability dismissal is being considered.
  • Provide the employee with an opportunity to prove their case.
  • If the employee isn't capable after a medical expert deems them so, ensure you explore reasonable accommodations that could render the employee fully capable (for instance, possible alternatives include changing hours of work).

Unfair dismissal laws and capability

Most unfair dismissal claims arise when an employer fails to follow fair procedures prior to confirming a dismissal.

The Workplace Relations Commission (WRC) will examine the following questions in an unfair dismissal claim which are also applicable in cases involving capability:

  • Did the employer believe that the employee was guilty of misconduct as alleged?
  • If so, did the employer have reasonable grounds to sustain that belief?
  • Did the employer carry out as much investigation into the matter as was reasonable before dismissing the employee?
  • If so, was the penalty of dismissal proportionate to the alleged misconduct?

The best way to minimise the risk of unfair dismissal claims is to have thorough disciplinary policies and procedures in place and to follow them strictly before confirming a dismissal.

Expert employment law advice on capability

Managing employees with capability issues and who might be performing poorly is a challenging area for business owners to handle.

To find out more about how to manage concerns around capability in your workplace, speak with one of our expert HR consultants today on 1800 719 216

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