Designing Legally Defensible Performance Appraisal Systems

By Metz, Edmund J. | Training & Development Journal, July 1988 | Go to article overview

Designing Legally Defensible Performance Appraisal Systems


Metz, Edmund J., Training & Development Journal


Designing Legally Defensible Performance Appraisal Systems

Performance appraisal is a popular subject. Seminars on the topic are usually filled, professional association meetings featuring expert speakers on the subject are likely to be heavily attended, and a regular stream of articles on the subject regularly appear in the management literature. So, with all this information available, why do we continue to seek the perfect system? Why, in the constant process of appraisal system revisions, can't we seem to get it right?

Legality and competitiveness

As if there weren't enough problems with appraisal processes, performance appraisal systems have been increasingly subjected to legal scrutiny in the last few years. Human resource professionals have felt increased pressure to assure that their company's appraisal systems are legally defensible as well as more supportive of competitive business thrusts.

Are we expecting too much from appraisal systems? Is it possible to design a system that is both legally defensible and enhances performance? What factors are important in assessing a performance appraisal system?

Legally defensible

appraisal systems

Mergers, acquisitions, and economic turbulence have greatly affected the working ranks of America. Company-initiated early retirements, layoffs, firings, and plant closings have adversely affected millions of blue- and white-collar workers in legally protected classes: people of different ethnic or racial backgrounds, different religions, women (some pregnant), people over 40 and under 70, handicapped people, and Vietnam veterans. Companies frequently use performance appraisal information to identify employees for staff reduction efforts.

Increasingly, however, employers have been discovering that when they take action based on appraisals against anyone in a protected class, their action and their appraisal system need to be on strong legal ground. If an employee challenges an action, claiming membership in a protected class, it is the employer's responsibility to demonstrate that it treated everyone in the employee's protected class equally. The court will then ask the employer to provide performance appraisal information and other supporting evidence for the personnel decision in question. The plaintiff's attorney also will be very interested in the employer's performance appraisal system. The attorney will want to know all the ins and outs of that appraisal system and if intent and practice actually mesh.

You can see that unless you have properly designed and managed your appraisal system, you have set yourself up for a number of legal risks. In fact, out of the last 10 performance appraisal system audits I have conducted for client companies, eight had some legal risk and six had significant legal deficiencies.

Usually a company's greatest risk is due to review forms that show acceptable or even good performance and will, therefore, undercut the legitimacy of a subsequent personnel decision. Another common risk is in the case of employers who fail to carefully follow their own published policies. A discharged employee also may claim that a failure to inform him or her during a performance review of both the unsatisfactory performance and the possibility of discharge constitutes negligence on the part of the employer. Such a claim was recognized by a Michigan federal district court in Chamberlain v. Bissell, Inc. and resulted in an award of $61,000 in damages to the wrongfully discharged employee.

Although court cases where former employees win significant awards make for sensational nes copy, you'll learn more about designing legally effective appraisals by examining cases where employers have won.

Elements of legally defensible

systems

Performance appraisals have assumed greater importance in four kins of personnel actions: promotion, discharge, layoffs, and merit pay decisions. …

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