PIP or Package: Constructive dismissal?

At a glance

• In the recent case of Danica Gutierrez v Cafico Corporate Services Limited, the Workplace Relation Commission (WRC) awarded an employee EUR17,900 in a successful constructive dismissal claim after she was offered an exit package after being placed on a Performance Improvement Plan (PIP), despite not resigning for four months following the 'PIP or Package' conversation.
• In doing so, the WRC found that offering an exit package just three days after placing the employee on a PIP breached the trust and confidence in the employer-employee relationship.
• The Complainant did not raise an internal grievance, however, her failure to exhaust internal grievance procedures was not fatal to her claim as there was no grievance policy in place nor were there any other internal remedies available, highlighting the importance of having a such a procedure in place. 

Background

• The Complainant commenced employment with the Respondent on 15 August 2022.
• On 26 September 2023, the Complainant was invited to a meeting with the Chief Accounting Officer and informed that she would be placed on a PIP.
• On 3 October 2023 (three working days after the PIP), the Complainant was invited to a second meeting with the CEO and the Chief Legal Officer, with 13 minutes notice, where she was offered an exit package of two months' notice, being EUR14,300, (despite contractual entitlement to three months' notice, being EUR21,500) and an ex-gratia payment of EUR5,000. The Respondent submitted that if she rejected the package she would go back on the PIP. The Complainant submitted that she was told she would be exited from the Company regardless of whether she took the package or not.
• The Complainant went out on medical leave on 3 October 2023 and resigned nearly four months later on 30 January 2024.

The Complainant lodged claims with the WRC, alleging (amongst other claims) that she had been constructively dismissed.

Constructive dismissal claim

• The WRC found that summoning the Complainant to a meeting and offering an exit package three working days after being placed on a PIP was the 'embodiment of unreasonable behaviour' on the part of the Respondent.
• In the decision, the Adjudicating Officer found that blind-sighting an  employee by inviting her to a meeting at short notice, unaccompanied and offering two months' pay plus EUR5,000 to exit the company – an amount that was less than the Complainant's contractual notice entitlement, was an action that went 'to the very root of the relationship between an employer and employee and utterly undermined the implied term of trust and confidence'. The Adjudicator felt that this fact was so significant that she did not have to consider the conflict in evidence between the parties as to what was actually said at the meeting.
• The Complainant's failure to raise an internal grievance was not fatal to her constructive dismissal claim as there was no grievance procedure in her employment contract, employee handbook nor were any internal remedies made available to her. The WRC considered the absence of a grievance procedure from an otherwise comprehensive suite of policies to be a 'striking omission' on the part of the Respondent.

Redress 

The Complainant submitted that her financial loss amounted to EUR48,548.55, however, the Adjudicator made an award of EUR17,917.50 after taking into account the failure of the Complainant to properly mitigate her losses. 

Although the Complainant had secured short-term employment, she failed to make reasonable efforts to secure employment in her proven area of expertise in a market that the Adjudicator considered had no scarcity of such positions.

Employer takeaways

• Employers should seek legal advice before initiating a PIP or package conversation to consider the most appropriate timing, notice and who should conduct and attend the meeting. Initiating such a conversation directly after placing an employee on a PIP may be used as evidence of having pre-determined the outcome of the PIP.
• Where an exit package is offered to an employee, it should encompass at least the employee's legal entitlement.
• There are no 'off the record' conversations between an employer and an employee in Ireland. These conversations can be considered in evidence in any WRC claim.
• Employers should ensure that the have a grievance policy in place. This is a mandatory policy under Irish law. 

If you require further advice or information on this decision or more generally, please contact a member of the DLA Piper Ireland Employment Team.