CHAUDHRI: Too many tech layoffs blamed on poor performance

It was Mae West who said an ounce of performance is worth a pound of promises. Being able to focus, execute and ‘perform’ are good traits for anyone to have – particularly for employees.

But performance, or more specifically the measurement of it, can be a nebulous exercise. Some metrics of performance are cut and dry and clearly objective, while other elements can be entirely subjective.

Performance, like beauty, may lie in the eye of its beholder.

No doubt, two managers may have a very different view of the same employee’s performance.

The very fact that performance can be measured differently by different people can give employers some broad discretion when it comes to assessing performance.

Some tech companies have harnessed the relative vagueness of performance assessment to support mass layoffs of employees. It’s an alarming trend.

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SFGate reported that Jack Dorsey, CEO of Block, laid off 931 workers earlier this year, including employees who were “off strategy” and “underperforming.” Dorsey told Business Insider in 2023 that he eliminated drawn-out performance improvement plans and preferred to terminate underperformers “without delay.”

Terminating 931 workers at the same time for purported under performance seems staggering, particularly when the company abolished an important performance management tool. Was this a mass layoff masquerading as something else?

Microsoft and Meta have also reportedly tied large scale layoffs to alleged widespread employee underperformance.

Similarly, Business Insider reported recently that Salesforce has introduced a new “PEP” or “PIP” program. Under this program employees are offered a “Prompt Exit Package” with less or lower severance. If employees refuse the PEP, “they will be put on a PIP (Performance Improvement Plan),” according to the story.

Business Insider reported that the performance pressure at Salesforce was implemented “as it executes its plan to reduce its workforce by 10%.”

While it makes some sense for employers to apply a higher level of scrutiny on employees if a reduction in workforce is being considered, there are obvious issues with the approach.

Firstly, performance assessments should never be made arbitrarily. An employee should be rated in a good faith way, not in anticipation of a future demotion or termination. If an employee is slated to be terminated (or even being considered for termination) an employer should not arbitrarily tinker with the employee’s performance rating in advance of the termination.

This should be obvious, but when mass layoffs are being tied to performance issues we must explore why an employer would be incentivized to do so.

Many employees receive raises, bonuses and commissions based on performance ratings. The higher the rating, the higher the bonus or raise. Now, if someone who is generally a high performer is terminated, they would expect a severance package that aligns with the compensation flowing from their high performance scores.

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In order to reduce costs, some employers may, on a bad faith basis, be painting good performers as bad or mediocre performers to subsequently reduce bonus/commission payments on termination. For example, in anticipation of the termination, lower the performance rating so as to support lower payouts on bonuses or other incentives.

While one must be careful to call out employer practices, it seems implausible that there were, at the same time, 931 poor performers at Block who all had to be done away with at once.

Employees should not take a poor performance review lying down. If the review is not fair or reasonable, it is of vital importance that it is protested, in writing. Saying nothing will lead an employer to argue that you accepted your fate, unfair as it was.

Canadian courts must be prepared to explore poor performance ratings just prior to a termination, particularly when an employee is terminated as part of a larger reduction. It is a tool that is being used too often by powerful companies and should be explored, not ignored.

Have a workplace problem? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.

The content of this article is general information only and is not legal advice.

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