The Law @ Work

Can You Terminate an Employee Before the End of a PIP?

By Marylou Fabbo

When it comes to Performance Improvement Plans (more commonly known as “PIPs”), employers’ hopes for a positive outcome can be crushed early on in the process. Here are some PIP scenarios our clients have asked us about:

  • “My employee’s performance has gotten worse since his PIP was implemented. Do I have to wait until the PIP is over to terminate?” 
  • “A few weeks ago we put an employee on a PIP for attendance and tardiness issues. Her tardiness improved but is starting to become a problem again. Do I have to tolerate this inconsistency for the whole PIP period?” 
  • “An employee on a PIP has developed new behavioral issues. Can we terminate if those aren’t addressed in the PIP?” 

In today’s market, replacing an employee can take quite a while and going through the motions with an employee who is not going to succeed can delay the process further. Even if an employee is on a PIP, it might be time to move on.

Employers often use PIPs to provide an underperforming and struggling employee with an opportunity to correct performance deficiencies and succeed at the organization. For some employers, a PIP is the final step in the disciplinary process; it provides an employee with one last chance to eliminate performance deficiencies or behavioral issues. For others, a PIP is put in place before the employee goes too far astray. In both situations, a PIP clarifies for the employee his or her deficiencies, expectations for improvement, and means by which to reach a satisfactory level of performance. Human resources and/or management may issue a PIP for any length of time, but the most common durations are 30, 60 or 90 days.   

During the PIP period, an employee’s manager usually meets with the employee on a regular, pre-established basis to review the employee’s progress toward meeting the PIP’s goals. Sometimes it’s not too far into the PIP period when a manager realizes that the employee will not be able to achieve satisfactory performance either due to lack of interest, ability or for some other reason. Does the manager have to wait out the PIP period before separating the employee from employment? According to the recent First Circuit decision in Santana-Vargas v. Banco Santander, the answer is no.

In 2006, Branch Manager Antonio Santana-Vargas became an employee of Santander Financial when Santander acquired his former employer. Over a period from 2009 until 2013, Santander documented Santana-Vargas’ declining performance as well as the declining performance of the Santander branch he managed. Eventually, Santander put the 49-year old employee on a 6-month PIP but fired him for performance deficiencies only a few months into the PIP. After he was replaced by a 32-year-old employee, the former branch manager sued the bank claiming his termination had been based on his age and violated the Age Discrimination in Employment Act. 

In support of his claims, Santana-Vargas argued that the fact that he had been terminated only a few months into the 6-month PIP showed that the reason given for his termination—poor performance—was a pretext, or smokescreen, for the real reason for his termination, which he claimed was his age. The trial court disagreed with Santana-Vargas and dismissed his claim before trial, a decision he then appealed to the First Circuit.

The First Circuit agreed with the trial court. According to the First Circuit, the fact that he was notified that he could be terminated if he did not meet and surpass the PIP’s minimum requirements, as well as a lack of any promise he would be given the entire 6 months to improve, did not commit the employer to employ him for the 6 months when it became clear that his performance had become worse during the first couple of months of the PIP.

What can an employer learn from this case? Being clear about the consequences of failing to successfully meet expected performance standards benefits both the employee and employer. Knowing that failure to meet the PIP’s goals may result in demotion or termination from employment is likely to provide an employee with a strong incentive to take action to turn things around. For employers, this clarity will permit them to cut the cord on an employee who fails to demonstrate immediate and sustained improvement rather than going through the motions for the duration of the PIP period.  

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