Do your managers hold regular performance reviews with employees? If they don’t, then they should. Performance appraisal is a highly effective way to nip potential problems in the bud, give employees the tools and information they need to succeed, and lay the groundwork for discipline and, if necessary, termination if the employment relationship just doesn’t work out.
Despite these many benefits, some companies don’t evaluate employee performance regularly. Of course, some of this is due to lack of time, other priorities, or sheer procrastination. But some employers avoid performance reviews because they fear it can lead to liability. In fact, done right, performance evaluations can help you stay out of legal trouble.
Legal Issues When Reviewing Performance
An effective performance evaluation system can help you avoid legal problems by helping you stay on top of performance and conduct issues when they first surface, giving employees notice that they need to improve, and providing evidence of fair treatment if employees must be disciplined or fired. There are a few legal traps to watch out for, however. By avoiding these pitfalls, you can avoid creating unnecessary liability concerns:
- Don’t undo at-will employment. Most employees in the United States work at will, which means you can fire them at any time, for any reason that is not illegal (discrimination is an example of an illegal reason to fire). If you make promises of job security, or state that employees won’t be fired without good cause, however, you can undermine your right to fire at will. For example, if you say in a performance review that an employee “can look forward to a long future with us,” you may have undercut your ability to fire that employee later for poor performance or for financial reasons. Most employers don’t fire without a reason, but reserving your right to fire at will means you won’t have to prove your reasons for termination to a judge or jury.
- Be consistent and fair. Discrimination claims start when employers treat employees in the same situation differently. Use the same standards and procedures to review everyone’s performance and conduct. If course, different jobs have different criteria. But your managers should not be quicker to discipline Latino employees, downgrade only women for being assertive and forceful in the workplace, or hold employees with disabilities to higher standards.
- Avoid retaliation. Employers may not take any action against an employee because that employee has complained of harassment, safety violations, wage and hour issues, or other potential legal violations. If you downgrade an employee’s performance for complaining – for example, by stating that the employee “is not a team player” – you can create legal problems. (Learn more about retaliation claims in Proving Workplace Retaliation.)
Best Practices for Reviewing Performance
There are a number of good performance appraisal systems and forms out there. Your lawyer can help you choose the best one for your company. No matter what paperwork you decide to use, follow these best practices to make sure your reviews are effective and legal:
- Review employee performance throughout the year. Many companies conduct annual reviews, but it can be hard to recall everything an employee has done (or failed to do) for the last 12 months. Instead of relying on your memory, keep tabs on performance throughout the year. Use a log or computer file to note important events, like especially high-quality work or missed deadlines. This will help you make sure your annual review fairly captures the full year’s work.
- Step in when needed. Employees can only improve if they know there’s a problem. If you see an employee faltering, don’t just make a note of it for a review that’s months away. Sit down with the employee and talk over the problem. If your company has a coaching process, use it. Give employees every opportunity to improve, in real time.
- Involve employees in the process. Ask employees to tell you what they did right (and wrong) during the year. Give employees a chance to respond to the evaluation. And, take your performance evaluation meeting with the employee seriously: If you got something wrong or forgot an important accomplishment, amend your review. By including employees in the evaluation, you’ll help them feel more ownership of the process.
- Document everything. If you later have to rely on your performance assessments to demonstrate why you disciplined or fired an employee, contemporaneous documentation will be your best legal friend. Your log or appraisal, written at the time the problems surfaced, will help your company prove that the problems were real, the employee knew about them, and your company didn’t manufacture them after the fact to try to cover up an illegal termination.