Most lawsuits related to performance appraisals are based on the failure of a manager to:
- Follow the program’s procedures consistently.
- Have sufficient documentation to support evaluations.
- Be objective in assessments by applying criteria consistently.
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Let’s assume, for instance, that your organizational policy calls for quarterly reviews but you review one employee only once, at the end of the year. The individual gets a poor rating and no raise. Maybe you even put the person on warning. This person may have a case for contesting the appraisal because he, unlike his peers, didn’t get the benefit of ongoing feedback and consequently had no way of knowing a problem in his performance ever existed, let alone the nature of the problem or degree of disappointment you had in his work.
Companies have learned that they can trigger more lawsuits. But this shift in thinking puts a heavier burden on managers like you to provide an adequate paper trail to justify your assessments of your employees.
The third and final error—inconsistent application of standards—can also win a court case for a disgruntled employee. Let’s say an African American is late seventy-five days during the year and is ultimately terminated for chronic tardiness. The employee has a savvy lawyer and he investigates and finds that you fired other employees, white and black, for the same reason. On the other hand, you didn’t fire one white employee who was tardy more than seventy-five times. Indeed, he is still in your department. The lawyer might argue that the black employee might not have been terminated had he been white. And the plaintiff might win his case at considerable cost to your company.
Courts will also investigate your goals and standards to be sure they are realistic and based on the actual needs of the job. This is required under the Equal Employment Opportunity Commission’s Uniform Guidelines on Employee Selection. The Guidelines demand that standards be "valid," or job-related, and beyond that, that your firm’s appraisal system measures job performance accurately.
These rules mean you must evaluate on objectives alone. You may have a very talented individual who fails to use her full potential. You may know that she is capable of doing much more than the standards set, even with the stretch you’ve added. It may be frustrating to see her let that potential go to waste, but so long as she is meeting the standards you’ve set, she is doing her job.
Another red flag for courts is managers who can produce documentation only about poor performers or have only bad things to say about an employee. Critical incidents, good and bad, should be documented for all employees—poor, average, and outstanding.
Too much documentation can backfire, too. It provides more fertile ground a lawyer can plow to dig up an instance of discrimination. On the other hand, extensive documentation discourages frivolous lawsuits. Unless a lawyer sees potential for a high damage award, he or she is unlikely to invest valuable time digging for evidence of unfair treatment of a client.