Performance Reviews Can Cut Both Ways In The Courts

The answer, unfortunately, as is often the case with discussions about litigation, is that it depends on a number of factors, not the least of which is what the courts end up deciding. And of course, whether the system you use to measure and document employee performance is sufficient evidence to protect a company against allegations of discrimination and/or unfair legal practices.

Even lawyers are unsure.

Biggest Legal Concern: Complaints of Discrimination

One of the justification some experts offer in support of doing performance reviews is that they provide documentation that any actions regarding a specific employee are not a result of illegal discrimination. Primarily, in the USA, this has to do with potential violations of EEOC rules, which forbid certain actions that are deemed to be based on race, gender, even age.

In the event that an employee is terminated, as an example, and then claims that termination is a result of some form of illegal discrimination, and then files a complaint, the company will need to show that the decision was not based on illegal discrimination against a protected class, but based on poor performance.

To do that, the company requires documentation to present to the court that spells out the performance deficits in sufficient detail, and free of bias, and that's where performance reviews come in.

Work At Will States And Performance Reviews

Most states in the USA do not offer employees protection from being let go. That is, the company need not provide any reasons to terminate employment. For that reason, and in those locations, performance reviews do not play a major role in documenting the dismissal, since "firing for just cause", isn't a requirement.

That said, even in At Will states, companies must still comply with anti-discrimination (EEOC) laws.

Where There Is Stronger Worker Protection

In jurisdictions where there is an expectation that companies must have just cause to dismiss an employee, then documentation comes into play. Be advised that some professions may differ in this respect, and REQUIRE proper justifications. For example, university professors tend to be "more protected", and do teachers. So, the legal value of performance evaluations differs not only from jurisdiction to jurisdiction, but also by profession.

The Fly In The Ointment: Many Performance Reviews So Terrible They Backfire

The ultimate problem, though, is that POOR performance review systems can backfire, and it's not possible, in advance, to know what a court will decide about YOUR system. Rankings and ratings may be deemed too unreliable or biased, and can be used in a court case to bolster an employee's claim of discrimination.

So, a really good system of documentation and review "may" help if you have to go to court, but the courts will decide on a case by case basis, which is unpredictable. A really bad system, and that may include rating systems, which lack any reasonable level of reliability and validity, can be really risky, but once again, courts decide.

Additional Resources on Performance Appraisals And The Law

Check out our more detailed section on performance management and labor law for some handpicked articles on this topic.

There are also more frequently asked questions about these performance appraisals and legal issues here.