How to implement “creative” punishments

Employment Law Column - 9 October 2017

In part two of our two part series on "creative" punishments, we take a look at unpaid suspensions, withholding pay increases and bonuses, and demotion.

In our first instalment – "How to punish bad behaviour" – we gave you some outside the box suggestions for disciplining problematic employees. We want to expand on this theme of "creative" punishments and provide a little more guidance on how to implement innovative disciplinary actions.

As with all things in life, you need to plan ahead if you want to be able to apply original punishments that are fit for the crime that an employee commits. And no, we don’t mean implanting electro-shock microchips in your employee’s arms in anticipation of bad behaviour.

We have done the heavy lifting for you and reviewed the legal hoops that you have to jump through in order to apply creative disciplinary alternatives.

Unpaid suspensions

It may sound a little bit ‘high school’, but having the ability to suspend an employee without pay may be a valuable alternative disciplinary tool. Ordinarily, you can’t suspend an employee without paying their salary the whole time (even if they have been taking you to the cleaners).

To allow you to suspend the employee without pay, you need an express provision in the employee’s employment agreement that provides for this measure and lays down the reasons where it may occur. For example, where it has been determined that the employee has stolen from the company after an exhaustive investigation and the punishment remains to be determined. This way, you reduce the risk of a breach of contract claim, among other things, as well as avoiding having to pay an employee who has done the wrong thing.

Withholding pay increases or bonuses

If one of your employees has been found to have committed an act of misconduct during the year, probably the last thing you’ll want to do is give them a pay rise or, worse, a bonus. Provided that your employee doesn’t have a contractual entitlement to a pay rise or bonus in their employment agreement, you are perfectly within your rights to withhold them.

Don’t get caught out (like an employee with their hands in the company till), ensure that the employment agreement contains wording that the employer has the right to review an employee’s remuneration and to increase it at the employer’s absolute discretion.

Regular internet and email spot checking

While the legal requirements for monitoring employee internet and email use varies throughout Australia, a good approach is to have a clear policy in place, which notifies employees that the employer may be monitoring their internet and email usage at any time.

With an internet and email policy in place, you’ll be able to easily commence regular internet spot checks on that employee who spends too much time on YouTube and not enough time on their sales targets, without running into trouble with any state or federal privacy or surveillance laws.

Demotion

This is a tricky one. Demoting an employee is a serious step, but can be an appropriate one. For example, if an employee has consistently failed to appropriately supervise their team, but they are otherwise a good employee, it may be necessary to put them in a role where they don’t manage people. This reduction in responsibility may also come with a pay reduction, about which the employee is likely to kick up a stink.

There is a risk that this could give rise to an adverse action claim, or even a constructive dismissal claim. However, the best protection for this is to follow these two golden rules:

  • Have flexibility in the employment agreement by including wording that the employer is able to change the employee’s role or position from time to time, including demotion for cases of misconduct, which the employer may determine in its absolute discretion; and

  • Follow the rules of procedural fairness before demoting an employee, including (where relevant) thorough and transparent investigations, performance improvement plans, opportunities to respond, opportunities to improve, and clear communication.

Another option is to make the demotion semi-permanent, with a clear path back to the employee’s previous superior role if they meet specific targets or KPIs. You may find this softens the blow of permanent demotion and reduces the amount of stink-kicking up… you know what we mean.

On a final note, it is important to remember that if you are going to implement any of these strategies, you should do so to the extent that they are reasonable and appropriate for your business.

By following these prudent suggestions, your business can implement these creative disciplinary options, which allow you to retain employees while dealing with their transgressions in an appropriate and less binary way, ie warnings or dismissal. And no need for microchips!  

This article is part of a regular employment law column series for HRM Online by Workplace Relations & Safety partner Aaron Goonrey and Lawyer Emma Lutwyche.  It was first published in HRM Online on 28 September 2017. The HRM Online version of this article is available here.

 

 

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