• August 2010

How Performance Appraisals Help You Stay Out Of The Courtroom

By Sharon Armstrong
The Essential Performance Review Handbook

As any business professional knows, the legal aspects of performance reviews are critical to understand. A lot of time and money can be spent if the process isn’t handled properly.

The reality is that an employer can use performance appraisals to defend against a claim. It also can be the focus of an employee complaint, or can be used as evidence in legal disputes tied to other employment decisions.

Below you’ll find a Q&A I recently did with attorney and EEO expert Diane Gold, who offers insight into the challenges and legalities of conducting a legal performance evaluation.

Sharon Armstrong: Talk to us about the best ways to manage an employee that is part of a “protected” class — such as those who are age 40 or older.

Diane Gold: This is a good question because this is a big issue for a lot of employers who have older, experienced employees — and want to keep them happy, but need to manage them.

Consider that an appraisal statement reads, “Carl needs to show more energy.” Well, that might be construed as an age-related criticism. When another employment decision is the issue, such as an employer’s alleged failure to promote an employee, that employee might point to outstanding appraisals to show reason for promotion.

So if an employee alleges that his or her job was terminated for a discriminatory reason, then, too, the employee may point to positive appraisals to show that the termination is not justified.

Sharon Armstrong: So how do you avoid these kinds of challenges?

Diane Gold: To avoid lawsuits alleging discriminatory appraisals, it’s vital that the performance objectives and the rating itself are consistent. If, for example, an employee is rated on elements that were not clearly articulated, he or she is more likely to allege that the rating is unfair. If there is no clear basis for the rating, the employee may assume that the reason for the low or negative rating is based on race, religion, sex, national origin, or another illegal categorization.

Sharon Armstrong: Is it true that as long as rating elements are objective, a manager will have an easier time defending a challenged rating?

Diane Gold: That’s right. If an employee is rated on “friendliness,” for instance, what does that really mean? What is friendly to one person might be annoying to another. Subjective criteria such as attitude, personality, or demeanor are inherently difficult to measure.

Examples of more objective evaluation factors include measuring how many sales an employee made, how often a copywriter has met deadlines, or whether a vice president has brought projects in on budget 90% of the time. While it’s not always possible to quantify rating elements with numbers, aiming for objectivity makes it easier for the manager to prepare the rating and easier for the employee to understand it. Quantifying those elements may also keep the rating from being challenged.

Sharon Armstrong: Is it also vital that supervisors keep a running file of notes on their employees’ performance?

Diane Gold: Most definitely. This ensures a contemporaneous performance record with specific examples to cite. With carefully kept records in hand, supervisors won’t have to dig into their memories and are more likely to produce an appraisal that fairly reflects the whole appraisal period, not just recent events.

Sharon Armstrong: Tell us a little about EEO Compliance. Does staying out of legal trouble mean rating employees equitably, based on their skills and abilities?

Diane Gold: Absolutely, because federal law prohibits considering an employee’s race, color, age, sex, religion, national origin, pregnancy, or disability in all employment decisions, including performance evaluations. State, county, or city laws, and local rules or ordinances, must also be followed.

The most legally damaging comments in an appraisal are those that blatantly indicate that the rater factored in a protected category. The focus must be on performance only. Also, managers must be trained in understanding and complying with employment laws.

Sharon Armstrong: I know from experience that another problem is giving employees higher ratings than they would otherwise receive—simply because a supervisor likes them, has a personal friendship with them, or is attracted to them.

Diane Gold: Right. Ratings that factor in personality conflicts can also trigger legal trouble. How much an employee is liked or disliked does not belong in the appraisal process, and supervisors must keep personal feelings in check to prevent claims of bias down the road.

Sharon Armstrong: What happens when you don’t provide evidence?

Diane Gold: Plaintiffs in employment cases often try to show that they do not deserve undesirable treatment by using positive performance appraisals. An employee questioning a demotion or low compensation will undoubtedly use positive performance ratings to prove that the negative action is unfair and unwarranted. If managers inflate ratings, they can find that their hands are tied later, when they need to let someone go.

In a case of alleged discriminatory termination, employees with a history of positive reviews can be expected to use those reviews or ratings as evidence on their behalf. In one age discrimination case, a court reasoned that the employer’s defense—that the plaintiff was a poor performer—was not substantiated by written ratings. The court ultimately concluded that using poor job performance as a reason for his RIF (reduction in force) was “an afterthought.”

And in analyzing discrimination cases, including ones involving performance appraisals, courts follow legal analyses and case law developed pursuant to Title VII of the Civil Rights Act of 1964. Three areas of evidence are analyzed in discrimination cases. First, the employee is required to prove a prima facie case that is considered to raise an inference of discrimination. Second, the employer must come forward with why it took the action in question. Third, in order to prevail on his or her claim, the employee must establish that the employer’s reason is not valid, or is merely a pretext for a discriminatory motive.

Sharon Armstrong: How do you establish a prima facie case of prohibited discrimination?

Diane Gold: You must prove three factors:
1. They are part of a protected class.
2. They have suffered an adverse employment action.
3. They have been treated less favorably than someone who is similarly situated who does not belong to their protected class.

Sharon Armstrong: When is a bad appraisal considered an “Adverse Action?”

Diane Gold: Poor performance appraisals, along with other business decisions that might make an employee unhappy, aren’t necessarily considered adverse actions under the law.

Courts generally look at whether the action at issue is a “tangible employment action” that amounts to “a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.”

Sharon Armstrong: So while a lower than expected rating itself may not rise to this level, the negative monetary effect of such a rating, such as a lower bonus, cash award, or salary, can often be considered an adverse action for making out a valid claim of discrimination. Right? Can you give us an example?

Diane Gold: For instance, in a Washington, D.C. case in which the plaintiff received a bonus of $807 based on a rating of “excellent,” instead of the $1,355 bonus that her co-worker received with a rating of “outstanding,” the court determined that this difference constituted an adverse action for the purposes of presenting a prima facie case of discrimination under Title VII.

To complete their prima facie case, employees must show that they were treated less favorably than someone in a similar position who is not part of his or her protected group. If employees can prove all the elements of the prima facie case, the burden then shifts to employers to defend their decision.

Courts will frown upon documentation of poor performance made after the appraisal is conducted. Created “after the fact,” such documentation might be viewed by courts as an attempt to cover up a rating that was not based on appropriate or lawful criteria.

Sharon Armstrong: So tell us, when is an inconsistent rating considered discriminatory “pretext?”

Diane Gold: After a prima facie case is established, the court raises a presumption that the motivation behind the employment action was “prohibited discrimination” against the employee because she or he belongs to a protected group.

At this point, the employer can overcome that presumption by articulating a valid reason for taking the action. If the employer does so, the employee can introduce evidence tending to prove that the employer’s reason is not valid and is instead really pretext, with the real motive having been the prohibited discrimination that the employee originally alleged.

“Pretext,” in the context of job performance ratings, means that the employer is not being truthful and that the actual reason for the negative employment action is either discriminatory or otherwise unlawful or inappropriate. Pretext can be shown in several ways: inconsistency in the evidence the employer presents or between the rating and the actual performance, or a difference in treatment between employees relating to the appraisal process.

For instance, if only some employees receive ratings, if employees with similar jobs are rated on different criteria, or when some employees receive extensive explanations of their ratings while others get minimal feedback, the employee can strengthen his or her legal case by pointing to the difference in treatment.

Sharon Armstrong: So when ratings are inconsistent, there is inequity—and, legal vulnerability. And if a lawsuit is brought, a court may find that “deviation from established policy or practice may be evidence of pretext.”

Diane Gold: Correct. Once a court finds that the employer’s defense is pretextual, it can infer that the employer is trying to cover up a discriminatory motive. Alternatively, courts have ruled that if an employee who suddenly gets a bad rating has a new supervisor, the sole fact that the new supervisor’s expectations differ from those of previous supervisors will not necessarily prove pretext.

Courts will also look at substantial changes in an employee’s work responsibilities as an explanation for deviation from a pattern of generally positive appraisals.

For an employee to ultimately prevail, he or she must prove his or her case by a “preponderance of the evidence“—that is, “that degree of relevant evidence which a reasonable mind, considering the record as a whole, might accept as sufficient to support a conclusion that the matter asserted is more likely to be true than not true.”

Sharon Armstrong: Are there any special considerations for people with disabilities?

Diane Gold: Sometimes an employer gets into legal trouble when a supervisor thinks that a bad rating might be the result of a mental or physical problem and asks the employee health-related questions. A court could interpret these types of questions as evidence of disability discrimination.

However, if the employee reveals and/or explains that he or she has a medical issue that requires attention, the supervisor should handle the matter with sensitivity and refer the employee to personnel who are trained to handle these types of issues (for example, an Employee Assistance Program, a staff nurse, or the Human Resources department).

The message here is that the supervisor should focus on the performance deficiency itself, without speculating about the reason for its occurrence.

Sharon Armstrong: When do retaliation claims arise?

Diane Gold: When employees allege they received a lower rating than they would have otherwise because they filed an EEO complaint or engaged in other activity that is considered “protected.” Employers need to be particularly careful about fairness in rating an employee who has engaged in such activity.

It is generally easier for an employee to prevail on a retaliation claim than to prove the initial claim of discrimination itself.

Sharon Armstrong: In order to prove a retaliation claim, what must employees generally prove?

Diane Gold: They must prove that they engaged in a protected activity; that their employer was aware of the protected activity; and that the employer took adverse action against them.

They must also show there was a causal connection between the protected activity and the adverse action. Demonstrating that the adverse action followed the protected activity within a short period of time is one way to establish a causal connection.

Employees and their attorneys might scrutinize a rating that is received after an EEO complaint was filed. If the rating is lower than the employee received in previous years, or the language reflects hostility or a previously absent critical tone, there is often fertile ground for a new EEO complaint based on the rating.

Sharon Armstrong: After an employee files a discrimination charge, or he or she is otherwise involved in a discrimination case, what must supervisors do?

Diane Gold: They must take special care to treat him or her fairly. Although it might be difficult to focus on fairness if the employer considers the employee’s claim unjust, supervisors must work to keep any acrimonious feelings in check.

Sharon Armstrong: Does this differ for team evaluations?

Diane Gold: All individuals participating in evaluations must understand and be trained in the process, as well as in EEO laws, documentation, and consistency. This is especially important because if an employee ever challenges an evaluation and/or the appraisal process, a court could see a derogatory or otherwise inappropriate comment by one of several evaluators as tainting the entire process.

Also, an employer’s efforts to train supervisors on how to comply with employment laws is an important part of defending against an EEO claim.

Sharon Armstrong: What about e-mails and other documentation? Is this required?

Diane Gold: When an employee challenges a performance appraisal in court, his or her attorney will be able to access and review a wealth of information, any or all of which could shape the court’s decision. Documentation includes previous performance appraisals, other employees’ appraisals, and memos and e-mails concerning performance.

E-mails are often the evidence of choice in employment discrimination cases because people generally take less care when writing them than when writing official correspondence or documents on company letterhead. Take heed, or your hard drive may show up in court. Here again, training is vital.

Sharon Armstrong: Thank you so much for all of this useful and important information Diane. I encourage readers to check out your Legal IQ quiz at the end of Chapter 8 of my book, The Essential Performance Review Handbook.

About Diane Gold, JD

Diane S. Gold, JD

Diane Gold is an attorney who spent several years litigating private and federal sector EEO cases with a DC law firm before founding EEO Management Solutions in 1996. Her clients include private corporations, non-profits and the federal government. She has also designed and conducted training programs covering all areas of EEO, employment law, and harassment. Her training sessions have been attended by all levels of employees, from Presidents to HR managers, to line managers and staff.

As an investigator, Diane has taken on a wide variety of issues including those involving high level employees, dozens of witnesses and highly complex legal matters. Her investigative experience includes working extensively with Verizon to investigate and resolve EEO claims as well as management/employee issues. She has also conducted discrimination and sexual harassment investigations for the Department of Justice and the National Science Foundation, among others.

A graduate of American University Law School and Lehigh University, she received her mediation training at the Northern Virginia Mediation Service. Diane is a member of the Virginia State bar, the Society for Human Resource Management (SHRM), and the DC chapter of the Association for Conflict Resolution. She has also served as a Mediator with the Equal Employment Opportunity Commission.

For more information, you can visit www.eeomanagement.com.

About Sharon Armstrong

Sharon Armstrong has over 20 years of experience as a Human Resources consultant, trainer and career counselor. Since launching her own consulting business in 1998, Sharon Armstrong and Associates, she has consulted with many large corporations and small businesses. She has facilitated training, completed HR projects and provided career transition services for a wide variety of clients in the profit and non-profit sectors.

Sharon received her Bachelor’s Degree from the University of Southern Maine and her Masters Degree in Counseling from George Washington University. She is a certified Professional in Human Resources (PHR).

Sharon is the co-author of a humor book, published by Random House entitled Heeling the Canine Within: The Dog’s Self-Help Companion in 1998. Career Press published her first business book, Stress-free Performance Appraisals: Turn Your Most Painful Management Duty into a Powerful Motivational Tool in July 2003. The Essential HR Handbook: A Quick and Handy Resource for Any Manager or HR Professional was published in August 2008. Her next book, The Essential Performance Review Handbook was published in the Spring of 2010.

http://www.beinkandescent.com/entrepreneur-of-the-month/650/guy-kawasaki-s-enchantment-the-art-of-changing-hearts-minds-and-actions http://www.currysauto.com http://www.beinkandescent.com/tips-for-entrepreneurs/530/to-everything-turn-turn-turn-roger-and-camilla-mcguinn-s-tips-for-entrepreneurs http://www.andyhinesight.com/ http://www.beinkandescent.com/tips-for-entrepreneurs/1897/mob-rules-what-former-heist-expert-louis-ferrante-can-teach-you http://inkandescentnetworking.com/?s=network http://www.beinkandescent.com/tips-for-entrepreneurs/1288/do-you-have-the-barefoot-spirit-here-s-are-11-ways-to-harness-it http://www.beinkandescent.com/tips-for-entrepreneurs/2229/science-of-gratitude http://www.beinkandescent.com/entrepreneur-of-the-month/1127/entrepreneurs-in-education http://www.beinkandescent.com/tips-for-entrepreneurs/21/julie-s-tips-for-entrepreneurs http://www.beinkandescent.com/entrepreneur-of-the-month/893/Maria+Bartiromo http://www.beinkandescent.com/tips-for-entrepreneurs/461/business-tips-from-the-love-doctor http://www.beinkandescent.com/entrepreneur-of-the-month/2163/holy-bagumba-kate-dicamillo-s-flora-ulysses-takes-readers-on-an-incandescent-adventure-costco-connection http://www.sharonarmstrongandassociates.com http://www.beinkandescent.com/tips-for-entrepreneurs/1462/government+rules www.bartlettpearinn.com http://www.beinkandescent.com/tips-for-entrepreneurs/102/the-bognet-way http://www.beinkandescent.com/entrepreneur-of-the-month/2055/the-fun-of-paying-it-forward http://www.beinkandescent.com/tips-for-entrepreneurs/736/the+four+generations http://inkandescentnetworking.com/index.php?s=host-directory http://www.beinkandescent.com/tips-for-entrepreneurs/270/jonathan-alter-s-tips-for-entrepreneurs http://www.pr-rules.com http://www.beinkandescent.com/entrepreneur-of-the-month/1081/Pamela+Hartigan http://www.beinkandescent.com/tips-for-entrepreneurs/236/nell-merlino-s-tips-for-entrepreneurs http://www.beinkandescent.com http://trulyamazingwomen.com http://www.beinkandescent.com/entrepreneur-of-the-month/863/ridley-pearson-lights-up-the-sky http://www.beinkandescent.com/entrepreneur-of-the-month/1924/michael-franti http://www.beinkandescent.com/tips-for-entrepreneurs/1272/Seth+Goldman http://www.beinkandescent.com/tips-for-entrepreneurs/323/the-magic-of-blackboard-inc http://www.beinkandescent.com/tips-for-entrepreneurs/359/steven-schussler-s-5-ps-for-business-success-personality-product-persistence-people-philanthropy http://www.weaversway.coop http://www.beinkandescent.com/tips-for-entrepreneurs/653/guy-kawasaki-s-journey-to-enchantment http://www.beinkandescent.com/tips-for-entrepreneurs/1791/7+Top+Dog+Tips http://www.beinkandescent.com/tips-for-entrepreneurs/447/a-look-inside-the-nature-conservancy http://www.beinkandescent.com/tips-for-entrepreneurs/2230/what-can-entrepreneurs-do-to-fight-for-human-rights-karen-hanrahan-explains http://www.theinkandescentradioshow.com http://www.beinkandescent.com/tips-for-entrepreneurs/1819/mansour-javidan-s-tips-for-successful-global-leaders http://www.beinkandescent.com/entrepreneur-of-the-month/1987/darrah-cloud http://www.beinkandescent.com/entrepreneur-of-the-month/1163/what-it-means-to-have-it-all-insights-from-52-truly-amazing-women-and-some-amazing-men http://www.beinkandescent.com/entrepreneur-of-the-month/2147/andy-hines-shines-a-light-on-the-future-of-the-workforce http://www.inkandescentnetworking.com http://www.beinkandescent. com/tips-for-entrepreneurs/586/ I%27ll+Mature+When+I%27m+Dead http://www.beinkandescent.com/articles/?c=hiring http://www.inkandescentnetworking.com www.houseofsteep.com http://www.beinkandescent.com/tips-for-entrepreneurs/781/alan-webber-s-favorite-rules-for-2012-and-beyond http://www.beinkandescent.com/tips-for-entrepreneurs/690/good-ideas-optimism-and-a-healthy-splash-of-doing-good-success http://www.beinkandescent.com/entrepreneur-of-the-month/974/dont+sweat http://www.beinkandescent.com/tips-for-entrepreneurs/1202/3-ways-to-become-more-empathetic http://www.theessentialhrhandbook.com http://www.beinkandescent.com/tips-for-entrepreneurs/561/starbucks-rules http://artatlargeinc.com/ http://www.weaversway.coop http://www.beinkandescent.com/tips-for-entrepreneurs/299/dr-ben-carson-offers-advice-for-entrepreneurs-on-how-to-conduct-a-best-worst-analysis http://www.beinkandescent.com/tips-for-entrepreneurs/501/lee+woodruff+tips http://www.beinkandescent.com/tips-for-entrepreneurs/1763/how-to-create-a-lean-in-circle http://www.beinkandescent.com/tips-for-entrepreneurs/426/insights-on-business-from-the-rosetta-stone http://www.beinkandescent.com/entrepreneur-of-the-month/2100/Montpelier http://www.beinkandescent.com/tips-for-entrepreneurs/1849/Charting+the+Course http://www.beinkandescent.com/tips-for-entrepreneurs/183/ted-leonsis-tips-for-entrepreneurs http://www.beinkandescent.com/tips-for-entrepreneurs/1918/dr-andrew-weil-s-tips-for-achieving-emotional-well-being http://inkandescentpr.com http://www.beinkandescent.com/entrepreneur-of-the-month/650/guy-kawasaki-s-enchantment-the-art-of-changing-hearts-minds-and-actions http://www.beinkandescent.com/entrepreneur-of-the-month/954/martha-beck-helps-you-find-your-way-in-a-wild-new-world http://www.beinkandescent.com/tips-for-entrepreneurs/653/guy-kawasaki-s-journey-to-enchantment http://www.beinkandescent.com/tips-for-entrepreneurs/714/wannabe-fools http://www.beinkandescent.com/tips-for-entrepreneurs/152/tactical-tips-from-gina-schaefer http://www.beinkandescent.com/tips-for-entrepreneurs/1737/Zieglers+7+Tips http://www.beinkandescent.com/tips-for-entrepreneurs/205/muhammad-yunus-tips-for-entrepreneurs http://www.beinkandescent.com/entrepreneur-of-the-month/1007/the-science-of-healing http://www.beinkandescent.com/entrepreneur-of-the-month/2082/what-will-your-second-act-be http://www.inkandescentspeakers.com http://www.beinkandescent.com/tips-for-entrepreneurs/1702/marketing-professor-raj-sisodia-on-the-future-of-business-success http://www.beinkandescent.com/tips-for-entrepreneurs/1870/dr+ruta+aidis http://inkandescentnewsletters.com http://www.crewscontrol.com http://www.beinkandescent.com/entrepreneur-of-the-month/2100/Montpelier http://www.beinkandescent.com/entrepreneur-of-the-month/1966/selling-with-noble-purpose-what-you-need-to-know http://www.beinkandescent.com/entrepreneur-of-the-month/818/reebok-s-president-uli-becker-jumpstarts-the-shaping-up-of-america http://www.beinkandescent.com/entrepreneur-of-the-month/2041/PR+Rules http://www.beinkandescent.com/entrepreneur-of-the-month/1058/michael-gerber-takes-us-inside-the-dreaming-room http://www.beinkandescent.com/tips-for-entrepreneurs/401/robert-s-rules-for-non-profits-businesses-volunteers-and-donors http://www.beinkandescent.com/tips-for-entrepreneurs/2201/can-lsd-and-ecstasy-help-us-harness-the-power-to-heal http://www.beinkandescent.com/tips-for-entrepreneurs/620/unleash-your-potential http://www.inkandescentpr.com http://beinkandescent.com/back-issues?q=2011-10