Performance Management vs Unfair Dismissal in Victoria: Where Employers Slip Up 

Performance management and unfair dismissal in Victoria are closely intertwined — and often misunderstood. Many employers intend to manage underperformance but end up walking straight into an unfair dismissal claim. The line between a valid performance process and a procedurally fair termination (VIC) is thinner than most realise. For employees, understanding when performance management crosses the line is crucial to protecting their rights. 

This article maps out the key risks for employers, explains employee protections under Victorian and federal law, and highlights the right approach to avoid legal exposure. 

Understanding Performance Management in Victoria 

Performance management is designed to help an employee meet required standards — not to punish or force them out. A sound process identifies performance issues, sets measurable expectations, and provides support to achieve improvement. 

According to the Fair Work Ombudsman, a valid process includes: 

• Clear communication of performance concerns; 

• Reasonable time and opportunity to improve; and 

• Objective evidence supporting any disciplinary step. 

If any of these elements are missing, the process risks being viewed as unfair, coercive, or pretextual, particularly if termination follows soon after. 

Employers seeking guidance on managing performance issues should review the principles outlined by the Fair Work Ombudsman or speak with a specialist from our Employment Law team. 

When Performance Management Becomes Unfair Dismissal 

A dismissal becomes unfair when it is harsh, unjust, or unreasonable under the Fair Work Act 2009 (Cth). Even when the employer has a legitimate reason — such as poor performance — the process used can render the dismissal invalid. 

Common employer missteps include: 

• Failing to issue a proper show cause letter outlining allegations and allowing a response; 

• Using performance reviews as a cover for redundancy or personality conflicts; 

• Not offering genuine improvement opportunities or training; 

• Making a termination decision before the review process concludes. 

The Fair Work Commission routinely hears cases where employers label a dismissal as “performance-related,” yet lack the procedural fairness to justify it. 

The Risk Map: Where Employers Slip Up 

1. Lack of Procedural Fairness 

For a procedurally fair termination (VIC), the employer must follow a transparent process.  

This includes: 

• Informing the employee of performance issues in writing; 

• Giving them a reasonable chance to respond and improve; 

• Allowing a support person during meetings; 

• Objectively assessing evidence before deciding on termination. 

Failing any of these steps can make even a well-intentioned process look punitive. To better understand employer duties under Fair Work, see Unfair Dismissal and Employer Obligations: Staying Compliant with Fair Work Standards. 

2. Insufficient Documentation 

A lack of written evidence — such as performance notes, improvement plans, or copies of show cause letters — weakens an employer’s defence. Documentation is crucial to demonstrate consistency and fairness. 

3. Pre-Determined Outcomes 

When employers appear to have already decided to dismiss before completing the process, tribunals may find the dismissal to be unfair. Even informal comments like “it’s time to move them on” can undermine credibility. 

4. Inadequate Communication 

Poorly structured or rushed meetings can lead to misunderstandings. Employees must clearly understand the performance issues and what improvement looks like. 

5. Ignoring Mental Health and Workload Factors 

If underperformance stems from workplace stress, medical issues, or excessive workloads, dismissal without considering these factors may breach general protections and discrimination laws. 

The Employee’s Perspective: Rights and Remedies 

Employees in Victoria are entitled to fair treatment throughout any performance management process. When employers fail to follow proper procedure, affected workers may have strong grounds for an unfair dismissal claim. The key rights below help employees understand when a process crosses the line. 

Employees have the right to: 

• Be notified of performance issues and given an opportunity to respond; 

• Receive adequate time and support to improve; 

• Challenge a dismissal that is harsh, unjust, or unreasonable; 

• Lodge an unfair dismissal application with the Fair Work Commission within 21 days of termination. 

If successful, the Commission can order reinstatement or compensation. 

For more information on unfair dismissal, visit our Employment Law page. 

The Role of a Show Cause Letter 

The show cause letter is a pivotal step in ensuring procedural fairness. It formally invites the employee to explain why disciplinary action, including termination, should not be taken. 

An effective show cause letter should include: 

• Specific examples of performance concerns; 

• Reference to prior discussions or performance reviews; 

• A clear opportunity for the employee to respond; and 

• Reasonable timelines for that response. 

Employers often fail by issuing generic or accusatory letters that do not specify evidence or allow adequate time to reply. 

How Employers Can Get It Right 

Effective performance management requires consistency, transparency, and legal awareness. Employers who take a structured approach can avoid the pitfalls that lead to unfair dismissal disputes. The following steps outline best-practice principles for managing underperformance lawfully and respectfully. 

1. Create a Transparent Process 
Develop a structured performance improvement plan (PIP) that identifies key performance areas, measurable targets, and support mechanisms. This plan should be documented and acknowledged by both parties. 

2. Communicate Early and Consistently 
Address performance issues promptly rather than saving them for annual reviews. Ongoing communication demonstrates fairness and prevents surprise terminations. 

3. Seek Legal Advice Before Termination 
Before ending employment, especially for performance reasons, employers should seek advice from an employment lawyer or consult Pentana Stanton Lawyers’ Employment Law services to ensure compliance and reduce litigation risk. 

4. Keep Fair Work Obligations in Mind 
Employers should familiarise themselves with resources from the Fair Work Ombudsman to ensure compliance with best practice procedures. 

For Employees: Spotting Unfair Dismissal Red Flags 

Employees should watch for signs that performance management is being used as a dismissal tactic rather than genuine support: 

• Receiving sudden or vague performance concerns after years of good service; 

• Being excluded from key meetings or denied support; 

• Being pressured to resign during performance discussions; 

• Being issued with a show cause letter without prior performance warnings. 

If these occur, employees should seek immediate legal advice to preserve their rights. 

Case in Point: Lessons from Victorian Disputes 

The Fair Work Commission has consistently ruled that even when performance concerns exist, a failure to follow due process can render a dismissal unfair. In several Victorian cases, dismissals were deemed harsh because: 

• The employee was not given a fair chance to improve; 

• Feedback was subjective or inconsistent; 

• The employer’s documentation did not match its claims. 

This underscores that procedural fairness is as critical as the reason itself. 

Risk Management Checklist for Employers 

Before taking any disciplinary action for underperformance, employers should ensure they have: 

• Clear performance standards and expectations; 

• Documented evidence of poor performance; 

• At least one formal performance review; 

• A valid show cause letter and employee response; 

• Considered all mitigating factors (e.g., health, workload, discrimination); 

• Followed procedurally fair termination (VIC) standards and maintained objective records. 

Employers who follow these principles not only reduce legal exposure but also foster trust and transparency within their workforce. 

Frequently Asked Questions (FAQs) 

Avoiding Costly Missteps in Performance Management and Unfair Dismissal 

Performance management, when handled lawfully and transparently, strengthens workplaces. But when employers bypass fair process, they expose themselves to unfair dismissal claims and reputational damage. 

At Pentana Stanton Lawyers, our employment law specialists assist both employers and employees to navigate the fine line between performance management and unfair dismissal in Victoria. 

For tailored advice or representation, contact our team or explore our Employment Law and Unfair Dismissal services.