Do you require regular performance reviews with employees? If not, then you should be.
The Performance Appraisal is a highly effective way to develop your employees, 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. Performance appraisals can make or break your defense against a wrongful termination claim.
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 process will help you avoid legal problems by helping you stay on top of performance and conduct issues when they first appear, giving employees notice that they need to improve, and providing evidence of fair treatment and clear expectations 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 Destroy the At-Will Relationship. Most employees 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.
Don't Undermine Potential Terminations. If you terminate an employee, you need to have documentation that supports, or at least doesn't contradict, the reason given for the termination. You need to ensure that your employee reviews and associated goal setting provide accurate and complete records for each employee.
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.
Train your Reviewing Managers. To many of us, proper employee treatment seems like it would be common sense, but you cannot expect your managers to automatically know what they can and cannot say to employees. Many times, managers are promoted because they are good at their particular job, but not necessarily good at managing people. If you're going to put employees in leadership positions (that can create liability for the company), you have the responsibility to ensure they are receiving the training they need to be effective and keep you out of trouble.
Best Practices for Reviewing Performance
There are a almost countless performance appraisal systems and formats available these days. Your HR professional or attorney can help you choose the best one for your company. No matter what format you implement, follow these best practices to make sure your reviews are effective and legal:
Review employee performance constantly. Annual reviews are wonderful tools, 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 HRIS 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. An example of how Windsor can assist with this is through the Memo function in WindsorWEB, which will allow users to make notes that can be sent to other employee users in the system. Also, managers and employees can track things like continuing education, employee skills, and other employee events.
Review and Maintain Position Descriptions. If your employees, an managers, don't have a good guide to follow, how can you expect them to set appropriate goals and meet organizational needs. Spend the time to develop AND maintain your position descriptions. These will assist you in many areas including recruiting, employee reviews and development, and justification for HR actions, etc.