Avoiding Legal Troubles with Employee Reviews


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.

  • Give timely feedback. 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.

  • Keep employees involved 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 login the HRIS 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.

  • Use an HR Information System or similar solution. An HRIS will help managers and employees keep track of when reviews are due, when the last review was conducted, and what goals were set as an outcome to the meeting. The HRIS will also help managers see attendance trends, compensation information - including last pay rate change, and other important employment related information that can help guide the review and goal setting process.

If you would like some help with your HR function to ensure you are getting the most out of your employees and maintaining as much focus on what drives your bottom line as possible, please contact us at sales@windsorhr.com.



Kevin Steckley has been a small business advisor with Windsor HR Services since 2005, and he has worked with hundreds of companies serving thousands of employees across 40 states in a wide range of industries. He has a PHR Certification from the HR Certification Institute, as well as the SHRM-CP designation through the Society for Human Resources Management. He is a 2014 Business Journal 40 Under 40 Honoree, has served as a SHRM Chapter Board Member for 5 years and has helped raise over $443,000 through his involvement with several charities and community organizations over the past 7 years.


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