Managing toxic employees: human and financial workplace costs

A workplace is a team environment. It functions best when the atmosphere is positive. One of the biggest concerns for employers, in Ontario and elsewhere, is how to address and manage the presence of a “toxic employee” in the workplace. In a recent report from the Harvard Business School, “toxic worker” was defined as someone who “engages in behaviour that is harmful to an organization, including either its property or people.”

The harm that an organization experiences due to toxic employees may include:

1. a drop in workplace morale;
2. the loss of competent staff; 
3. the creation of a culture of fear; 
4. increased friction and divisions which impede progress; 
5. increases in sick leave; and
6. unwanted liability for the organization.

Generally speaking, employers have two options in dealing with a toxic employee: terminate their employment; or seek to change their behaviour. A recent BBC article, “How should firms deal with a toxic employee”, considered the phenomenon of toxic employees and the viability of these options.  

The simple option, perhaps, is to dismiss the employee from employment. Depending on the employment agreement that is in place, however, and how the employee has been managed to this point, this may prove a costly proposition. The toxic employee may have a significant severance entitlement. It may also be necessary to first confirm that the toxic employee’s behaviour is not the result of a mental illness. Thus, if an employer intends to dismiss a toxic employee without the obligation to pay severance, it is necessary to ensure that the behaviour allows this type of response, and that the situation has been appropriately managed and documented. One owner interviewed in the course of the BBC article did dismiss a toxic employee and stated “we needed to show our company that one person does not stand above the team…the money and time we spent handling the situation…well, it could have been a lot worse if he stayed on.”

While on its face, dismissal may seem an appropriate response, some employers are reluctant to go this route because toxic employees can also be significant source of revenue. Dr. Dylan Minor, a professor at Northwestern University, when interviewed for the BBC article, observed that toxic employees “are usually very productive, because overconfident workers can be successful.” He further noted, however, that this benefit can be greatly outweighed by the cons.

In its report on toxic workers, the Harvard Business School considered the cons associated with employees of this kind. It estimates that retaining a toxic employee can, on average, cost an employer an additional $12,000 USD – significantly more than the average estimated value of increased productivity a toxic employee can provide.

Another option is to attempt to rehabilitate a toxic employee. First, employers should set out clearly a code of conduct that is fairly and consistently enforced. Through this mechanism, employers can set a framework for acceptable conduct and look to foster a positive workplace culture. Second, management must be proactive and nip the problem in the bud. By allowing a toxic employee to bloom and flourish, it simultaneously sends a message to other staff that this type of behaviour will be tolerated and creates a sense of hopelessness for those affected. As such, your management should actively coach and correct the toxic employee’s behaviour. Helpful tools in this regard include regular meetings, the implementation of a clear and structured Performance Improvement Plan and, as necessary, documented oral and written warnings. 

A final option for employers to protect and maintain a positive work environment is to put in place processes to reduce the likelihood of “bad apples getting into the bunch”. This may be done as part of an interview and screening process. According to the BBC article, one Toronto-based employer, Loyalty One, requires that all senior job applicants meet with psychologists. Loyalty One Chief Executive Officer, Bryan Pearson, told the BBC that this step is taken because psychologists “are able to identify where there might be risk factors when hiring an individual.” 

Loyalty One’s approach raises some concern. It potentially allows an unsuccessful job applicant to assert discrimination on the basis of disability. As such, should an employer choose to put in place a gate-keeping process to limit the probability of hiring toxic employees, it should do so only after careful consultation with an employment lawyer. It is necessary to ensure that the process is lawful and unlikely to attract unwanted liability under legislation such as the Ontario Human Rights Code. 

This article was originally published on December 16, 2016 on First Reference Talks.

Vey Willetts LLP is an Ottawa-based employment and labour law firm that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the National Capital Region and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca