What legal benefits do performance reviews offer?

How to conduct an effective performance review 

Effective performance reviews can increase employee productivity and efficiency while demonstrating workplace fairness and objectivity. Conversely, poorly executed reviews can increase litigation risks by providing evidence employees can use in age discrimination, retaliation, and other employment-related lawsuits.

Unsatisfactory performance is a legitimate reason for employee termination. When employment litigation arises, proper reviews are helpful evidence of inadequate or unsatisfactory employee performance.

Best practices for employee performance reviews

Follow these steps to conduct an effective appraisal:

1. Implement standard topics. Each review should assess job duties, employee achievements — or lack thereof — strengths, and weaknesses. It is also essential to set forth how receptive employees are to instruction, their communication skills, and their workplace attitude.
2. Eliminate reviewer bias. If any suspicion of reviewer bias exists, consider using someone other than the employee’s direct supervisor, such as a human resources professional or independent committee. Objectivity is paramount.
3. Utilize specificity. Vague appraisals are unhelpful and potentially damaging. The most effective feedback provides specific examples of an employee’s performance, concerns, and methods of improvement. It is also vital to consider each job task independently.
   
   The more specific the review, the better evidence it provides to support legitimate termination.
4. Create a formal record. A casual conversation between an employee and an employer does not constitute a formal review. One of the most critical elements of scheduled reviews is the formal record they create.
5. Provide honest feedback. Although addressing an employee’s underperformance can be awkward, failing to provide constructive criticism does your employee a disservice. Not only will the employee not know how to produce better results, but they will also assume their current work is flawless and a demotion or termination could blindside them.
6. Prepare to diffuse potential confrontation. Performance reviews should take place face-to-face. Take the following steps to promote a constructive meeting and reduce the risk of a potentially legally significant confrontation:
   
   • Create a meeting script based on clear and consistently applied policies and expectations.
   • Bring a witness to any review that will include disciplinary action. The witness can reduce the temperature of a heated meeting and can testify about the substance of the meeting in future legal proceedings.
   • Treat the employee respectfully.
7. Implement performance metrics and set forth an improvement action plan. Document isolated incidents and ongoing concerns in the employee’s personnel file. Also, schedule a follow-up meeting to discuss the employee’s progress following a review that included disciplinary action. Attach a timeframe to all action plans and don’t stray from the plan.
   
   Offering training and professional development sessions demonstrates a commitment to employee improvement — courts view these measures favorably.
8. Consider employee feedback. Always allow time for the employee to address problems and document their comments. Do not solicit input in a manner that constitutes unlawful interrogation under the National Labor Relations Act (NLRA).

Both the employee and the reviewer must sign the completed review; the employee’s signature is evidence of the review’s receipt. Document any refusal to sign.

Some employers think performance reviews are more trouble than they’re worth, citing fear of legal action when the exact opposite is true. Properly conducted reviews are helpful, and employers reduce legal risk when they avoid common review-related pitfalls.

Common performance review pitfalls and their legal consequences

Performance review missteps can negate its benefits. These missteps can be evidence of wrongdoing during employment-related litigation. Avoid the following:

• Emotional, sarcastic, or unnecessary language. Performance feedback sessions are already stressful, and derisive comments create needless confusion and misunderstanding. It’s essential to maintain professionalism.
  
  Reviewers who allow nervous energy to get the best of them risk divulging confidential information about another employee, thereby infringing on that employee’s privacy rights.
• Review delays. Announce evaluation procedures during the new employee onboarding process and include the company’s review policy in the employee handbook, such as the policy template from Practical Law. Do not postpone a scheduled evaluation. Late reviews can upset employees, and judges and juries can see them as evidence that the employer does not take the review process seriously.
• Overly subjective reviews. Job-specific criteria are a vital review metric. It is more helpful to indicate whether someone has met a percentage of a sales goal than to say their work is effective or ineffective.
  
  Performance reviews based on subjective criteria can increase the employer’s risk of litigation and liability exposure. Supervisory bias can permeate a subjective review. Subjective criteria can also lead to an employee’s belief that the supervisor is treating the employee unfairly, singling the employee out, or discriminating against the employee. Treating similarly situated employees differently can result in claims of discrimination. The use of objective, measurable criteria applied consistently to all employees reduces the risk of future litigation.
• Ambiguous reviews. Not only do ambiguous reviews reduce the likelihood of employee improvement, but they also muddy future employment litigation waters. Poor performance is always a valid reason for termination, even if the fired employee is a member of a protected class. However, judges and juries are less likely to believe that poor performance prompted an employee’s termination when the review is ambiguous and fails to clearly outline the employer’s expectations.
• Inaccurate reviews. No one wants to hurt an employee’s feelings, but the desire to be polite creates an inaccurate performance review. Common causes for inaccuracies are actively protecting the employee’s feelings due to fear of how the employee will react — particularly when the employee has a history of volatility — and allowing inadequate time for review completion.
• Failing to conduct an internal investigation before implementing disciplinary action. Create an investigation team to evaluate potential wrongdoing. These teams promote consistent handling of investigations and limit the number of individuals who know about the investigation’s findings. Failure to conduct an internal investigation before taking disciplinary action can lead to:
  • An increased risk of litigation by the employee accused of the wrongdoing
  • An increased risk of litigation by any employees harmed by the alleged wrongdoing
  • An increased risk of retaliatory claims
• Taking disciplinary measures related to false accusations or criminal activity unrelated to the workplace. Work-related discipline is only appropriate for work-related wrongdoing. Unlawful, off-duty activity is off-limits unless there is a legitimate business purpose for the discipline. Review relevant federal and state laws when considering disciplinary action, particularly discipline that may lead to termination:
  • The Equal Employment Opportunity Commission (EEOC) has issued guidelines on the use of criminal history in employment decisions; criminal history inquiries pose a risk of creating disparate treatment discrimination claims.
  • Many states offer legal protection from employment discrimination based on arrests or other indicators of criminal activity.
  • State law that authorizes the use of medical or recreational marijuana may govern discipline related to off-duty drug use.
  • Employers who wrongly accuse an employee of job-related criminal activity could face a defamation lawsuit. It is best to contact local law enforcement when someone suspects a workplace crime.
• Violating anti-discrimination laws. Being a member of a protected class does not eliminate the potential for termination. Employers must know the legal risks associated with firing such individuals and follow federal and state employment regulations. For more information on state-specific resources on anti-discrimination law, see Practical Law’s State Anti-Discrimination Toolkit.

Properly conducted performance reviews can be an employer’s best defense against employment-related lawsuits.

How do performance reviews provide a legal defense to wrongful termination claims?

In the face of employment-related litigation, anecdotal evidence is barely evidence at all. Conversely, well-documented proof of poor performance dramatically impacts the decisions of judges and juries.

Include documentary support
Employers must make disciplinary decisions in writing. Inadequate documentation creates suspicion that an illegal practice — such as discrimination like protected characteristics or retaliation like whistleblowing — is the basis behind discipline or termination.

Thoughtfully prepared written documents are useful when employees file wrongful termination lawsuits. Proper evaluations like this template from Practical Law with drafting tips and explanations include a review signed and dated by the employer and employee — to quash any attempt to claim lack of notice — a copy of the review handed to the employee and a copy retained in the employee’s personnel file.

Written discipline records help employees understand and learn how to address the employer’s concerns. These records also protect the employer’s interest during the litigation process by offering a nondiscriminatory reason for disciplinary decision.

Give employees an opportunity to respond
Everyone wants to be heard, and encouraging employees to share their feedback is legally advisable. Disciplinary decision documentation should allow employees to add their written comments about the discipline and the prompting circumstances. Allowing employee comments confirms the receipt of a clear message and prevents employees from making contrary arguments about the disciplinary process during litigation.

Conduct an internal investigation of workplace wrongdoing
An internal employee investigation is necessary when suspected wrongdoing is the basis for disciplinary action. Conducting an internal investigation before imposing discipline ensures competent evidence supports disciplinary actions. Promptly conducted investigations create a stronger legal defense and allow employers to gather witness interviews before memories fade.

Prepare a performance improvement plan (PIP)
A PIP is a tool used to help employees correct their workplace shortcomings. It should set forth:

• A list of areas requiring improvement with examples of poor performance
• An outline of the employer’s expectations and a description of how the employee can achieve that result
• A description of the consequences of failure to achieve the improvement specified within the plan
• A description of the resources available to the employee to help them achieve the desired improvement
• A process to monitor the employee’s progress

Even the most meticulous employer can face legal risks. Bringing your defense evidence to a qualified attorney is the best way to fight employment-related litigation.

Seek legal advice when facing wrongful termination allegations

Terminated employees often seek retribution. Employers must take wrongful termination, discrimination, and retaliation claims seriously. In these sticky legal matters, it is always best to rely on the advice of in-house counsel or a private employment law attorney.

In addition, gain insights with Practical Law’s best practices for conducting effective employee performance reviews. It is one of the more than 90,000 resources available to employers and can help them defeat wrongful termination and discrimination lawsuits. If you are not a subscriber, try a free trial of Practical Law today.