Are there legal risks associated with the use of 360? Are they legally defensible?
There are legal risks and potential liabilities involved with using 360 degree feedback, although you can reduce your risk by using 360 feedback correctly. The risk of a law suit associated with 360 increases when you use it for determining promotions, bonuses, pay raises and the like. It's much less when the ONLY purpose you use 360 for is to improve performance. In other words, use 360 as a replacement for traditional performance appraisals, and you have the potential for legal problems.
For the most part, the risks associated with performance appraisal in general, and 360 specifically have to do with whether the information used is valid, job related, accurately measures employee performance, and is not discriminatory against any protected classes. The major issue has to do with the potential for someone from a designated minority group who has been passed over for promotion, to accuse the company of discrimination. If 360 is used to determine who was promoted, AND, the company cannot demonstrate the validity, or relevance of the 360 process, that's where problems lie.
The employee can take the company to court, or to the EEOC or other human rights complaints boards.
In practice, most 360 systems use rating systems that are vague, and the raters themselves are given no training to ensure their ratings are valid or reliable. In practice, most 360 systems rely on ANONYMOUS feedback -- that is that the feedback given is not linked to any specific person. and the recipient does not know who rated what at what level.
The latter point puts 360 in a completely different light, as compared to other rating systems that have an identifiable manager as the source of the feedback. How can you prove that the feedback and information used to determine who got a promotion, is valid, relevant and non-discriminatory, when you can't even identify WHO provided that information?
Of course, with legal issues, you never know what the courts will decide in any specific case, even if there is some precedent going one way or another. It is safe to say that if you use 360 degree feedback to replace traditional performance appraisal, your risk of being sued, and the risk of losing the law suit increase. However, there's an alternate opinion.
Susan Heathfield, who writes about HR issues (but is also not a lawyer), suggests the following:
When feedback comes from a number of individuals in various job functions, discrimination because of race, age, gender, and so on, is reduced. The "horns and halo" effect, in which a supervisor rates performance based on her most recent interactions with the employee, is also minimized.
Perhaps, as with any legal issues, consultation with a qualified attorney is warranted, remembering that legal problems occur as a result of HOW something is applied, so the details are important.