Performance Appraisals in a Legal Contents

A performance appraisal itself may become the target of a lawsuit. Indeed, no evaluation system is completely immune to the risk of litigation. Even a well-designed system can subject an employer to various liabilities if it is poorly implemented or applied in an inconsistent manner. If they are well written and consistent, appraisals can support disciplinary or termination decisions. However, if poorly implemented they can support the plaintiff’s position.

As courts continue to carve exceptions out of the once solid ‘at-will’ doctrine, employers are facing escalating requirements for proof of legitimate business reasons for many personnel actions.

The employee performance evaluation has become the cornerstone of the employer’s defense against discrimination and wrongful termination charges and, as a result, has become one of the manager’s most important responsibilities.

Appraisals are Your Greatest Vulnerability When:

1) They are Discriminatory and Inconsistent

An employer may be liable for adverse employment decisions made against employees based on one of many protected characteristics. Today the legal system affords protection to attributes such as age, race, sex, national origin, religion and disability. This cause of action is termed disparate treatment.

Some states also protect sexual orientation and HIV, marital, pregnancy and military status. Performance evaluations become a liability even if they cause an unintentional impact on a protected class. Such action is termed disparate impact.

CASE STUDY

Vaughn v. Edel (1990): A discharged black female employee, Emma Vaughn, brought a Title VII action against Texaco, Inc. The evidence showed that, to avoid a discrimination suit, Vaughn’s supervisors were told not to confront her about her work. In neither criticizing Vaughn when her work was unsatisfactory nor counseling her how to improve, Texaco treated Vaughn differently than other employees because of her race. While the company’s decisions not to criticize Vaughn may have initially appeared beneficial, with objective feedback she might have sufficiently improved her performance so as to avoid termination. The court upheld the jury’s $465,000 punitive award.

2) They Become the Basis of a Lawsuit

If an employee is terminated and opts to sue an organization, the first documents the state Labor Commission or the plaintiff’s attorneys will ask to see are the performance appraisal reports. Unfortunately, many problems often come to light when these reports are closely studied.

The manager’s written comments in performance documentation may be too general, resulting in a review that takes individual strengths or weaknesses out of context or overemphasizes them. Similarly, comments may be ambiguously worded, leading to inaccurate or incomplete discussions of the extent of performance problems.

CASE STUDY

Chipollini v. Spencer Gifts (1987):
Spencer Gifts claimed that employee Chipollini was terminated because he was uncooperative and could not adapt to changes in the company. Unfortunately, the company could not produce any specific examples of plaintiff’s lack of cooperation. The court held that this failure on the employer’s part was sufficient evidence of pretext to allow the case to go to trial.

1. They are Too Charitable
   

Charitable evaluations amount to documentation against the employer! Sooner or later, every manager will probably regret the decision to tolerate charitable performance appraisal. You are effectively maintaining an impression of harmonious employee relations while raising the chances of future legal action against Affinity Group.

By not documenting both good and bad performance accurately, you actually do a disservice to your employees. First, it is clearly not fair to others to fail to distinguish between good and inadequate performance. Second, if an employee is fired or disciplined for incompetence and the case has to be defended in court, an accurate record will be essential.

CASE STUDY

Brito v. Zia Company (1973): The court found that Zia had no controlled appraisal scoring system. Two of three evaluators had no firsthand contact with the employee’s work resulting in many evaluations being over-charitable and not at all reflective of the individuals actual job performance.

4) They Are Conducted Negligently

Organizations also face liability from the negligent completion of a performance evaluation. While such cases have resulted in a good deal of academic debate, they have achieved slightly less recognition in the courts.

Incidents that form the bases of evaluations should be thoroughly investigated before making conclusions regarding employee performance, and employees should be thoroughly notified when they receive negative evaluations.

CASE STUDIES

Chamberlain v. Bissell (1982): In this action, a company manager relied on a

performance evaluation to discharge an employee. However, the employee in question was never informed that he would be discharged if his performance did not improve. The court held that the manager breached his duty to use ordinary care in conducting performance evaluations. Because the manager was in a position to give the employee an opportunity to improve, the court held that the manager was negligent in conducting the performance evaluation.

Schipani v. Ford Motor Company (1981): The court held that plaintiff could state a cause of action against his employer for negligence in carrying out performance evaluations. A quote: “…the law imposes an obligation upon everyone who attempts to do anything for another, even gratuitously, to exercise some degree of care and skill in the performance of what he had undertaken, for nonperformance of which duty an action lies.”

Appraisals are Your Greatest Defense When:

1) They Offer Clear Documentation of Performance

A manager faces complicated legal issues with almost every employment decision. When accomplished properly, documentation provides written proof of logic, business necessity and equity behind personnel decisions and substantiates management action. Documented proof is helpful and necessary to defend all types of employment-related lawsuits. A jury is often sympathetic to an employee claiming wrongful termination or discrimination by a former employer – and will award their penalty according to this feeling. When faced with an employee performance problem, a manager should document the facts as they occur, always realizing that every memo or evaluation could someday become part of a legal action against the organization or individual manager.

CASE STUDY

Hoffman v. MCA, Inc. (1998): A 54-year old vice-president who was fired for “disruptive behavior” and replaced by a 37-year failed to show that he was discriminated against because of his age. This was despite Hoffman’s recollection of comments from other members of MCA, that the company needed “fresh legs” and that Hoffman was “getting old”. The company presented significant and well-documented performance records to show that

the firing was because of a accumulation of ongoing behavioral problems.

2) They are Consistent

Consistency is one of the key elements to defending performance evaluation systems against potential discrimination charges. In addition, a consistent evaluation system enables management to discipline or discharge poor performers who happen to be the member of a protected class without constant fear of a lawsuit. It is particularly important to remember that both mitigating or enhancing criteria should be applied uniformly.

CASE STUDY

Beaird v. Seagate Technology (1998): This case is currently pending in the Court of Appeals. Seagate faces claims of age and race discrimination from eight employees who lost their jobs during a large scale workforce reduction. The company used stated criteria for termination in a selective manner and retained employees outside protected categories. Even worse, the organization also allegedly falsified performance evaluation forms of those it chose to terminate and hired new employees for jobs the company claimed were being eliminated.

3. They are Candid and Truthful

Performance appraisals that do not adequately identify an employee’s shortcomings can undermine subsequent discipline of a poor performer. In a legal action against an organization, a history of undeserved charitable evaluations makes it difficult to explain to a jury why an apparent ‘good’ performer was discharged.

The case below demonstrates that a realistic appraisal – no matter how distressing reality might be for your employee – is always the best defense.

CASE STUDY

Jensen v. Hewlett-Packard (1993):
In a victory for employers, the California Court of Appeals held that a performance appraisal cannot be used against an employer because the plaintiff disagreed with its contents. Jensen worked for Hewlett-Packard and received good evaluations for the first two years of employment. Then one of his co-workers was promoted to be his boss. In his first appraisal from his new superior, Jensen received lower evaluations in almost every category. Jensen disagreed with the appraisal and wrote a

12-page rebuttal, but Hewlett-Packard refused to alter the original appraisal document. He sued for libel and breach of good faith and fair dealing. The court noted that it is very common for employees to disagree with the employer’s criticisms. But it is illegal only if the employer cannot justify the evaluation and is only giving a good appraisal to avoid potential legal liability. In other words, even if the manager was too critical or if he or she made a mistake, the organization could not be sued.

Appraise Without Fear as a Manager

Managing performance without fear of EEO complaints is possible. The guidelines that follow are repeated throughout this program. However, managers who abide by them will face less risk of being accused of illegal practices.

To protect against legal actions, employers should:

• Use the test of ‘business necessity’ – i.e. only evaluate those areas that are necessary for effective job performance.

• Maintain accurate, up-to-date job descriptions.

• Communicate clear job standards so employees understand what they need to do to get top ratings in their appraisals.

• Don’t allow performance problems to continue unchecked; document problems when they occur so you can reference these records in your appraisal preparations.

• Be aware that outside forces (family or health problems) may be contributing to employees’ poor performance. However, while you can be aware of such issues, you cannot allow it to justify poor performance.

• Make performance evaluation an ongoing process and have appraisals filed correctly for employee reference.

• Work to establish an office culture in which top managers support their peers’ efforts to discipline poor performers.

• Be open to the possibility that employees may not be in the position that best suits their abilities; be aware of the need to rotate employees into different jobs.

A legally sound performance appraisal is:

• An OBJECTIVE job analysis
• Substantive in their coverage of all performance issues
• Consistent – everyone within a job group is treated equally
• Valid in terms of useful information and business necessity
• Evidence-based