Is Your Employee Performance Appraisal System Legal?

You carefully draft the job description, even making sure it’s legally compliant.  During the interview, you’re careful not to ask any inappropriate questions.  So why, a year or more later, would you undo all of your prior efforts through the use of a questionable employee performance appraisal process?

One false move – in this instance, implementation of a faulty performance appraisal system – can push the door wide open to potential employer liability.  In recent years, a growing number of class action lawsuits have been brought against several large companies claiming discrimination through performance appraisal systems.  This growing trend has a similar track with small businesses that use performance appraisals. How can your company dodge the bullet? While there is no “magic” answer, there are basic steps every company should take to ensure that at the very least, a performance review process is legally defensible:

1. Make sure performance appraisals are truly job- related.
2. Standardize appraisals for all employees.
3. Put appraisals in writing.
4. Perform appraisals annually.
5. Develop content of appraisals to ensure there is no  bias against color, race, sex, national origin, religion, or any other legally-protected group.
6. Allow employees to respond to performance appraisals.
7. Administer performance appraisals through a manager or supervisor with adequate knowledge of the person and job being assessed.

Even when following your best judgment, knowing when, or how, a performance appraisal process may violate an employment law can be tricky.  This is especially true, for example, when the line between a legitimate appraisal and potential violation of the Family and Medical Leave Act (FMLA) becomes blurred.  A case in point is the well-known, 1996 decision of Patterson v. Alltel. In this case, an employee accused Alltel of violating the FMLA by assigning him work below the standard assigned prior to him taking leave.  The employee also accused Alltel of giving him unfavorable evaluations after he returned from leave.  This, he asserted, led to his ultimate lay-off. In the end, the Court dismissed the employee’s claim because Alltel was able to prove that he had received poor ratings in his evaluations prior to his medical leave, and that the employee would have been laid off even if he had not gone on leave. 

In addition to taking basic measures to avoid legal issues with your performance appraisals, you can also establish a process of communication, even rebuttal, for employees not satisfied with the performance appraisal process. All of this should be documented in your company’s personnel policies.