Although the economy has improved somewhat, employers throughout the country in every industry are trying to do more with less. Even in relatively strong sectors of the economy, opportunities for promotion are limited, and bonus and salary pools are substantially smaller than they were prior to the downturn. Many employers are still being forced to lay off significant percentages of their workforces.
Employees who are passed over for a promotion, who feel that they are not being compensated fairly, or who are laid off may file a lawsuit alleging that the upsetting decision was unlawfully discriminatory.
Unfortunately, in a bad job market, laid-off employees may find it very difficult to locate another job, making them perhaps more likely to sue than they otherwise would be. Further complicating matters allegations of pay discrimination under federal law can be brought at any time, regardless of when the pay decision was made, as long as the employee has received one paycheck that was affected by the decision during the statute-of-limitations period. This means that a manager could be required to defend the decision to give one employee a raise over another five or 10 years later.
Even where an employee asserts a claim soon after a decision is made, litigation is a notoriously slow process. It could easily be more than two years between a layoff, promotion or compensation decision and the manager’s deposition in a lawsuit brought by the employee. Without effective documentation, it may be very difficult for a manager to recall the specific rationale for a decision made years before. Moreover, the manager who made the decision at issue may no longer be employed by the company and may not be available to testify, leaving the written performance review as the only evidence upon which the employer can rely in defending the lawsuit. Now, more than ever, managers need to take great care in preparing performance reviews, documenting decisions and maintaining their records.
The value of performance evaluations should not be underestimated. Failing to take the performance-management process seriously could create a significant risk of liability for the employer. It is, therefore, advisable for employers to impress upon managers the importance of performance evaluations and to train them on how to conduct the performance reviews effectively.
Best practices in performance assessment
Update job descriptions: Job descriptions are often drafted when an employee is hired—never to be looked at again. As time passes and roles evolve, so should job descriptions. The job description should be an accurate account of what an employee is expected to do throughout the year and should be reviewed and updated annually. A valid job description can serve as an effective outline for a performance evaluation, ensuring that the employee receives a complete assessment of all facets of the job. Maintaining current job descriptions will also prove useful to the manager who is forced to conduct a reduction in force and reorganize job functions. It is considerably easier to evaluate whether certain employees can take on new or additional responsibilities if you have a clear sense of the work they are doing.
Record significant events throughout the year: Many managers see performance evaluations as an annual or semiannual obligation. Unfortunately, our memories are often not as reliable as we think they will be. Managers should document important events throughout the year, including both employee successes and failures. This documentation need not be formal. It will suffice for managers to jot down or email notes to themselves about an employee’s performance. The important thing is to record impressions when they are fresh. While a manager may have a strong sense of an employee’s productivity, an evaluation is much more effective if that manager can point to several specific incidents throughout the course of the review period that support the assessment. Maintaining ongoing records will also prove useful if the employer is required to make layoff decisions outside of the ordinary performance review cycle.
Be consistent: The measures of performance should be consistent across employees in the same or similar roles. If different employees performing basically the same job are evaluated based on different metrics, the performance evaluation will not be useful in justifying why one employee was rewarded over another.
Be objective: When managers work closely with people over time, they may find it difficult to put aside personal fondness when evaluating employee performance. It is only human to want to spare the feelings of a friend, but managers who ignore or gloss over performance weaknesses only do themselves and their employees a disservice. All too often managers are forced to choose one or more employees to lay off, and while they know who the weaker performers are, the written performance evaluations do not support the distinctions between employees. If every employee in the department “exceeds expectations,” it will be very difficult for managers to justify layoff selections, both internally to their own supervisors and externally in possible litigation. In addition, without accurate feedback, employees might not recognize the deficiencies in their performance, and, as a result, they might feel blindsided when selected for a layoff. Those who feel that way may be more likely to file a lawsuit.
Be specific: A performance evaluation that identifies specific projects and issues is far more effective than one that speaks in generalities. Managers should describe employees’ projects and state what they did that was good or bad. Rather than simply say, “Employee does not keep me informed of the status of projects,” managers should add an example of a specific incident that shows the failure to communicate and a description of the problems that resulted. Such specifics will provide the employee being reviewed with a clearer understanding of what worked and what did not. The details will also assist the manager in explaining the basis for decisions in the event of litigation.
Identify areas for development and improvement and set goals: For employees to maximize performance, managers must identify the specific areas in which their performance needs to improve and which skills or knowledge bases should be enhanced. It is also important to set goals for such growth and improvement. This will give employees tangible benchmarks and goals and will give managers an objective measure to evaluate future performance.
Consider new performance metrics for new business imperatives: Layoff decisions should be based on objective criteria, one of which is performance. Unfortunately, the ordinary performance review, even when conducted in an ideal manner, may not be enough to establish the justification for the selections made in a reduction in force where the business plan is changing. When a company chooses to change its strategy and shift its focus, the relative value of different employees’ skills and knowledge sets may change. Employers, therefore, must consider whether to create new performance metrics to measure the employee’s ability to meet their future needs, as opposed to just the employees’ past performance.
For example, a clothing designer may employ several seamstresses. Employee A’s work with a particular type of high-end fabric may be rated a 5 on a 1-to-5 scale (with 5 being the highest score), while her work with the more moderately priced fabrics is only a 3. In contrast, Employee B’s work with the high-end fabric may be only rated a 3, but her work with the more moderately priced fabric is rated a 4. Based on those assessments, Employee A would be considered the better performer with an overall performance rating of 4 as opposed to Employee B’s rating of 3.5. As a result of the shrinking market for luxury goods, the designer might be choosing to eliminate the use of the high-end fabric, so the better performer for purposes of the company’s future needs would actually be Employee B, even though she has a lower overall rating.
If all of the factors considered are not documented properly, however, manager might find themselves trying to explain to a jury why they fired the employee with the higher performance rating long after they have forgotten about the role that employees’ abilities to handle different fabrics played in the layoff decision. Where the business needs are changing, managers should seriously consider preparing an additional written performance review to assess the employees’ skills vis-à-vis the company’s future needs.
The hallmarks of good performance evaluations are consistency, objectivity, specificity and documentation. A little bit of extra attention to the performance review process on the front end will enhance employee productivity and save the manager and the employer a lot of time and money in the event of litigation.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
Susan D. Friedfel is an associate in the labor & employment law department at law firm Proskauer Rose. She is based in New York. Comment below or email editors@workforce.com.