20 September 2021 by and Employment Law Alert

Court bars independent use of a performance management system to terminate an employment contract

Performance management systems are usually used by employers to assess the performance and productivity of their employees. Employees who perform well are lauded while those who perform dismally are taken through disciplinary hearings that seek to address their underperformance. The disciplinary hearings usually result in an employee receiving either a warning letter or a letter terminating their employment.

The decision of the Employment and Labour Relations Court in the case of Naomi Connie Lusiche v Barclays Bank of Kenya [2021] eKLR has now made it unlawful for an employer to terminate the services of an employee solely on the results obtained from a performance management system.

In this case, the court opined that the use of these performance management system as a mode of terminating employees contravenes section 45 of the Employment Act, which states that no employer is allowed to terminate an employment contract without valid reasons. To this end, the court identified that terminating an employment contract purely on the performance of the employee based on data obtained from a performance management system does not constitute a valid reason to terminate the employment contract.

The court further stated that the purpose of a performance management system is not to diversify the modes of terminating an employment contract but rather to address a perceived employment failure. In addition, the court indicated that an “objective” performance management system should address three key issues; one, whether there exists an underperformance in the workplace, two, why an employee has underperformed, and three, how that underperformance may be rectified.

The impact of the judgment on employers

This decision has now clarified the purpose and role of performance management systems in the work environment. Employers should, going forward, use these systems to strengthen and improve their employees’ performance. Performance management systems should not be independently used as a mode of firing employees but their function should rather be to help the employers get the best out of their employees.

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