Managing Performance and Misconduct Lawfully

Managing performance and misconduct lawfully: practical strategies to address employee issues while staying compliant with workplace laws.

Managing employee performance and misconduct is one of the most sensitive areas of workplace relations. Done well, it reinforces accountability, supports improvement, and maintains organizational culture. Done poorly, it can expose employers to significant legal risks, including claims of unfair dismissal, adverse action, or discrimination.

For managers and advisors alike, understanding how to handle performance and misconduct issues lawfully requires balancing procedural fairness with practical business realities. 

Understanding the Legal Framework

In Australia, employers need to consider a complex set of legislation and case law when managing performance and discipline. Broadly, the requirements of procedural fairness and reasonableness in the context of the Fair Work Act 2009 (Cth) must be satisfied in any situation where a warning, suspension or termination is under consideration. 

The Fair Work Commission (FWC) will determine on a regular basis whether a process has been followed by an employer in unfair dismissal cases, and may find against an employer even where the performance issue or misconduct is not disputed, but the process used by the employer has been defective. For that reason, HR professionals and line managers need to be trained in both the substance and the process of taking lawful management action.

Examples of common legal claims resulting from unfair performance management and/or poor handling of misconduct are listed below:

• Unfair dismissal: the dismissal has no valid reason or is procedurally unfair.
• General protections/adverse action: the employee claims that they have been disciplined or dismissed for exercising a workplace right.
• Discrimination or bullying: the process or outcome is claimed to be discriminatory or otherwise unreasonable.

Differentiating Performance from Misconduct

One of the initial challenges is differentiating between underperformance and misconduct. They are not the same and need to be addressed differently.

• Performance issues are about the employee’s ability or skill to do the job – such as failing to meet targets, quality of work or communication.
• Misconduct is about behaviour that goes against the workplace rules or policies – like dishonesty, harassment or insubordination.

Identifying this difference early on will help determine if a performance improvement plan (PIP) or a disciplinary procedure is more appropriate. Mixing the two can cause confusion and damage procedural fairness.

Managing Underperformance: A Fair and Structured Approach

When addressing underperformance, the goal should be improvement, not punishment. A lawful and effective performance management process typically includes the following steps:

1. Identify and document concerns: Clearly define the gap between expected and actual performance, supported by evidence such as KPIs or feedback records.
2. Meet with the employee: Discuss the concerns in a private meeting, allowing the employee to respond or provide context.
3. Set clear expectations: Outline what improvement looks like, how it will be measured, and the timeframe for review.
4. Provide support: Offer training, mentoring, or workload adjustments to facilitate success.
5. Follow up and document progress: Maintain written records of all meetings, correspondence, and outcomes.

If the employee fails to improve despite fair opportunity and support, formal disciplinary action may be justified. The documentation from the process becomes critical evidence if the decision is later challenged.

Responding to Misconduct Allegations

Misconduct allegations must be handled with care, confidentiality, and procedural integrity. A hasty or inconsistent approach can erode trust and lead to claims of bias or unfair treatment.

A lawful disciplinary process generally involves:

• Preliminary assessment: Determine whether the allegation, if true, could amount to misconduct.
• Formal investigation: Provide the employee with written details of the allegation and give them an opportunity to respond.
• Consideration of evidence: Ensure that findings are based on credible evidence, not assumptions or hearsay.
• Proportionate action: Match the disciplinary outcome — whether a warning, demotion, or termination — to the severity of the conduct.

Importantly, an employee should never be dismissed on the spot unless the misconduct constitutes serious misconduct (e.g., theft, violence, or gross dishonesty). Even in such cases, the employee must be afforded an opportunity to respond before a final decision is made.

Avoiding Common Legal Pitfalls

Even well-intentioned managers can inadvertently breach employment laws. Some of the most common pitfalls include:

• Failure to document: Without records of meetings or warnings, employers struggle to defend decisions before the FWC.
• Inconsistent treatment: Applying different standards to similar situations can suggest bias or discrimination.
• Rushing to judgment: Skipping procedural steps to “solve the problem quickly” often backfires.
• Retaliation or perceived victimisation: Disciplining employees soon after they raise grievances or complaints can be seen as adverse action.

Practical Strategies for Managers

Managers play a critical role in executing lawful performance and misconduct processes. To strengthen their approach:

• Plan ahead: Before initiating a conversation, gather facts, review relevant policies, and clarify desired outcomes.
• Communicate clearly: Use objective language focused on behaviour or results, not personal traits.
• Maintain confidentiality: Limit discussions to those directly involved.
• Seek HR or legal guidance: Early consultation can prevent procedural errors that escalate into legal claims.
• Reflect and learn: After each case, review what worked and what could be improved in handling similar situations.

CPD and Continuous Learning in Workplace Law

Given the legal complexity of managing performance and misconduct, continuous professional development is essential. Employment law evolves rapidly, and staying informed helps both HR professionals and legal advisors provide accurate, risk-aware guidance.

Participating in accredited programs such as legal CPD online courses allows practitioners to stay up to date on case law and procedural best practice. Many CPD Lawyers offer targeted training on investigation techniques, disciplinary frameworks, and effective communication during difficult conversations.

Earning CPD Points Law through such programs not only meets professional requirements but also enhances an advisor’s ability to guide clients through performance management with confidence and fairness. In doing so, professionals help create workplaces that are not only compliant but also transparent, respectful, and built on trust.