04 DECEMBER 2017
Work performance and sales targets
It is not often that a dispute about dismissal for poor work performance reaches the Labour Appeal Court. Yet this is what happened in the case of Damelin (Pty) Ltd v Solidarity obo Parkinson(2017). What made this case interesting, is that it was about an employee who failed to meet sales targets.
Dismissing an employee for poor work performance is more challenging than dismissing an employee for misconduct. If disputed, the first hurdle for the employer is to prove that the employee failed to meet a performance standard. Performance standards can be difficult to define. However, it is relatively easy to set sales targets. To make it even easier, one might even be tempted to characterise the failure to reach targets as misconduct. But the Damelin case shows how things can go horribly wrong.
Damelin carries on its business in the tertiary education sector. It has several campuses throughout South Africa. Parkinson was appointed as a general manager of the Boksburg campus on 3 January 2011. One of his performance goals was to find ways getting new students to enrol. Only 168 students enrolled at the start of the 2011 academic year. The national sales director made an estimate of the number of students in the catchment area and set a target for 420 students to be enrolled by February 2102. Parkinson objected on the basis that the estimate of the number of potential students in the catchment area was incorrect. He was also of the view that several other assumptions in determining the targets were wrong. In Parkinson’s view the targets were unattainable. He felt that he was set up to fail.
Various communications regarding the achievement of targets were exchanged during the year.
On 1 February 2012, the Group Chief Commercial Officer sent a letter to all general managers, stating that if they failed to achieve at least the enrolment figures achieved for 2011, action would be take to dismiss or redeploy them. Parkinson would therefore have to achieve 168 new enrolments by the end of February 2012. Only 117 new students enrolled, which meant Parkinson had failed to meet the reduced target. A disciplinary inquiry was convened and Parkinson was charged with poor work performance relating to his failure to reach sales targets. He was dismissed, but took his case to the CCMA.
At the CCMA arbitration, Parkinson explained the steps that had been taken to boost enrolment at his campus. The CCMA commissioner nevertheless found that it was not good enough. Higher standards were expected of senior employees. The communications Parkinson had received (including the one of 1 February 2012) were sufficient and formal warnings were not needed. The CCMA commissioner found that dismissal had been the appropriate sanction.
The Labour Court
The Labour Court (LC) disagreed. The LC viewed the matter as was one of misconduct and not incapacity (poor performance). The LC considered that the appellant could not willy-nilly depart from the procedures specified in its code. The communication of 25 January 2012 had been ambiguous and had not been a warning. In any event, dismissal could only be considered as a fourth step in terms of the code. Other considerations were also taken into account, but the net result was that the LC set aside the arbitration award and reinstated Parkinson.
The Labour Appeal Court
The Labour Appeal Court (LAC) followed a different approach. It stated that, at the outset, the matter must be decided on the characterisation of the dismissal as one for incapacity (poor work performance) and not one of misconduct. This meant that a different set of requirements applied.
It was clear that Parkinson had not met the sales target. However, the inquiry into whether Parkinson was given a fair opportunity to meet the target depends to a great extent on whether the targets were fair, i.e. reasonably achievable. The LAC found on the facts that this was not the case. The LAC added that, even accepting that the letter of 25 January 2012 constituted a final warning, the period of some 27 days within which to achieve the reduced target set in that letter showed that either the period was too short or that the target could not be achieved.
Parkinson provided convincing and uncontested evidence of his efforts. On the other hand, persuasive evidence on the part of Damelin was lacking. Several potential witnesses did not testify. The LAC concluded that Damelin had failed to prove that dismissal was fair and agreed with the LC that Parkinson should be reinstated.
The Damelin case illustrates that employers should not be overhasty in categorising matters of incapacity (poor work performance) as misconduct. Furthermore, setting targets does not necessarily simplify matters. The employer must also be able to show that the targets are reasonably achievable.
Source: LabourWise provides user-friendly information and documentation about labour relations and labour law in South Africa. Visit our web-site at: http://www.labourwise.co.za.