Ten Tips for Avoiding Liability in Conducting Evaluations, as appeared in The Legal IntelligencerMay 10, 2010
Performance appraisals have become an annual rite: Human Resources requires them; employees expect them; and supervisors hate doing them. In an employer's perfect world, managers would be free to evaluate employees' performances without fear of second-guessing by attorneys; judges would never make "business judgments"; and juries would routinely uphold an employer's assessment, giving little credence to an employee's disagreement.
Sometimes that happens, but often it does not. Regardless of whether performance appraisals are an effective management tool, a waste of time, or a harmful exercise — and there is evidence that they can be all of these things — for courts and juries, performance appraisals are often the most persuasive, albeit silent, witnesses in an employment action. Indeed, the Equal Employment Opportunity Commission Feb. 18 proposal to amend regulations addressing the Age Discrimination in Employment Act's affirmative defense of "reasonable factors other than age" specifically direct attention to performance appraisals for determining whether an employer has acted for legitimate or for discriminatory reasons. Thus, regardless of their intrinsic merit, appraisals treated as a mere pro forma exercise carry significant legal risk. A thoughtful, well-drafted appraisal, on the other hand, can help reduce risk and provide valuable evidence in overcoming challenges to an employer's personnel decisions.
10 Tips to Guide Managers in Performing Appraisals
1. Tell the truth. The fundamental issue in any lawsuit is determining who is telling the truth. Credibility is key. Often, however, supervisors will treat their obligation to complete performance appraisals as a task that simply needs to be checked off as done. Busy with other work, averse to creating conflict (particularly with a difficult employee) and loath to investing the time and attention needed to address performance issues, many supervisors just give bland "meets standards" reviews to all of their subordinates regardless of performance.
This approach not only denies the employee an opportunity to receive counseling that could lead to improved performance, but it also deprives the employer of critical documentation to support its employment decisions. Thus, when a "meets expectations" employee recently returned from Family and Medical Leave Act leave for treatment of cancer claims that his discharge several months later was because of disability and in retaliation for having taken leave, the employer would lack both evidence and credibility in asserting that discharge followed years of subpar performance and was unrelated to the employee's medical condition or FMLA leave.
2. Avoid subjectivity. Employers are generally free to set their own performance standards and criteria and to evaluate employees according to those standards. That an employee may be meeting different standards or achieving other goals than those relied upon by the employer will usually be irrelevant.
That said, courts and juries view over-reliance on unarticulated or subjective criteria in performance appraisals (particularly when used for making promotional or termination decisions) with skepticism. The Commission's proposed amendments to the ADEA direct that inquiry be made into the extent to which the employer gave supervisors unchecked discretion to assess employees subjectively.
To the degree possible, therefore, performance standards and measures should be measurable and job-related, i.e., relate to the essential functions of the job. The more objective the goals, the more useful the evaluation is both in business and in court.
3. Evaluate performance, not the person. Criticism and praise should be related to job performance, not personality. Avoid comments that attack the person and instead focus on the essential elements or function of the job. For example, an employee is better criticized for not meeting production schedules, customer delivery dates or deadlines than for "not caring" or having "bad attitude." Beware, as well, of comments that praise. An ex-employee's age discrimination claim will be bolstered by a co-worker's performance appraisal praising her for being "young and energetic."
4. Be consistent. Employers repeatedly give raises and bonuses to underperforming employees. They are disinclined to withhold money as a stick. They rationalize, for example, that the raise will provide the employee with incentive to do better next year, or that it is consistent with a low evaluation because the employee received less than others.
Rewarding poor performance only sends the message that the employee's work has been good enough for a raise or bonus. Employees who have received steady raises and bonuses year after year will have received a pocketful of evidence to challenge a discharge for alleged poor performance. Instead, consider deferring a raise pending improvement. In delivering the news, do not calm the employee with a reassuring, "Don't worry about it."
5. Remember, the year has 12 months. Avoid the temptation to provide a review based only on the employee's last quarter performance, because it is most freshly in mind. The annual review should reflect the employee's performance from the first quarter as well as the fourth.
6. Avoid ambush. The best evaluations will contain no surprises — good or bad, because the employee will have already been praised for his particular job well done, or counseled about her time and attendance. The annual review should summarize performance feedback the employee has already received during the year. Fast feedback recognizing accomplishment reinforces good performance, while immediate feedback when a problem emerges can help avoid repeated mistakes — particularly when couched in specific corrective (as opposed to punitive) terms. Early feedback thus serves the business interests of the company, creates valuable documentation and provides a guide for an effective annual review.
7. Beware of stereotyping. Employers ask for trouble when their managers praise traits in one demographic group while criticizing the same traits in another. Be mindful of subtle biases that can infect performance appraisals. A male employee, for example, should not be put on a promotion track because of his potential, at the same time that his female co-worker is wait-listed until demonstrating achievement. Here again, the EEOC's proposed ADEA rule amendments emphasize the point. The proposal specifically calls for inquiry into extent to which performance criteria for evaluating employees was based on factors known to be subject to stereotypes.
8. Don't just rubber stamp. Managers who without inquiry, simply sign review performance appraisals completed by others or who in preparing appraisals uncritically accept input from others raise the risk of employer liability. An executive who uncritically relies on biased information from a subordinate supervisor may become the "cat's paw," placing his employer on the hook for an adverse employment action, such as low-ranking on a reduction-in-force list or nonpromotion, arising from the review.
Signing a review is not a mere ministerial task. It sends a message of approval — as to both the content and the process. While courts have acknowledged that decision-makers necessarily must rely on information from others and need not be paragons of independence, blind, uncritical adherence to the information from or the singular influence of a biased source can lead to liability.
9. It's not just about the numbers. Assessing performance by numerical rating alone carries little information of assistance to the employer, the employee and, if it comes to that — a jury. Performance appraisals that contain specific examples of an employee's performance issues provide among the strongest evidence in defending a discrimination claim.
Employers, who have contemporaneously memorialized an employee's failures to follow procedures, absenteeism, typographical errors, low production, and the like, greatly reduce their risks of lawsuit, and increase their chance of summary judgment if sued. When a discharge for repeated but previously undocumented errors follows a medical leave or pregnancy, the risks skyrocket.
10. Meet. A manager who e-mails or drops a performance appraisal on an employee's desk closes the door to open communication, which is critical to diffusing anger, correcting misunderstandings and fostering teamwork. Managers should communicate with employees about their performance appraisals. They should not be drawn into an argument about the appraisal, but should be prepared to give consideration to the employee's comments and, if appropriate, to address them. It's best, of course, to have employees sign their appraisals acknowledging receipt, but if an employee refuses to sign — the employer today has an option that was unavailable years ago — send the employee a PDF of the review (with a cc to Human Resources). Providing a space and an opportunity for the employee's written comment is standard — and for good reason.
There is little question that employers will continue to be faced with performance problems and litigious employees regardless of their documentation and performance appraisals. When a lawsuit or threatened litigation happens, however, an employer's ability to muster a roster of "silent witnesses" confirming the reasons for its decisions will prove invaluable.
This article first appeared in the New Jersey Law Journal, a Legal affiliate.
Reprinted with permission from the May 10th edition of the "The Legal Intelligencer" © 2010 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.