A. Appraisals and Performance Reviews

Firing and/or disciplining unsatisfactory employees is not as simple as it used to be. Since the terminated individual may consult an attorney, it is essential to document problems in the employee's personnel file. Properly drafted performance appraisals can help protect your company by documenting employee problems; they also can improve performance. Therefore, appraisals should be prepared regularly, accurately and carefully.

Also too often, because supervisors are reluctant to hurt an employee's feelings, they inflate the appraisals and do not list the actual problems the worker has demonstrated. Never do this when employers fail to note performance problems on appraisals, and lack sufficient documentation to prove inadequate job performance, they may not have a legal basis for firing an employee.

One printing company did not follow this advice and suffered devastating results. The firm was sued by a former long-term worker who claimed he was terminated on the basis of age discrimination. Unfortunately, the company found itself with virtually no written documentation of the man's poor performance. The worst reviews were "satisfactory" (written favorably to build his confidence) and all warnings and reprimands he received were verbal (so there was no solid proof).

A jury found the company liable to the ex-employee and ordered it to pay $80,000 in damages over a three-year period, together with $40,000 in legal fees for the worker's lawyers. This sum was in addition to the approximate $90,000 the company had previously spent in legal fees for its defense and the work hours lost in preparing for the trial.

TIP: This actual case demonstrates the importance of issuing regular, accurate, carefully prepared and never inflated references and performance appraisals. Sparing a worker's feelings may lead to a weak legal position in the event of a firing.

Periodic Job Reviews

Companies often hesitate to implement a regular performance review program because of the time and effort needed to develop an effective one, and because supervisors have to spend valuable time completing review forms and communicating the results to employees. Managers often dislike doing periodic reviews because of the difficulty of summarizing someone's performance over a period of six months or a year on two or three sheets of paper, especially when the performance is not up to standard. However, skilled personnel may benefit from regular constructive feedback regarding their performance, especially when the employee helps to formulate his or her own performance goals.

Experts suggest that when employees are graded annually on job performance in specific areas, such as technical skills, problem- solving skills, management skills, and people skills, management will be better able to adjust to the individual's role in any change in company direction or emphasis. An effective review should include a discussion of past performance and should set goals for the future.

The following guidelines may help increase the effectiveness of performance appraisals and can protect your company:

1. State your performance appraisal policy in the company handbook. Employees are naturally suspicious of the perform- ance review process, so it is up to the employer to explain the process in a way that minimizes such fears. The policy must also state the possible general outcomes (i.e., a final warning leading to discipline and/or discharge) to prevent surprises. It should also inform employees that extended absences or serious violations may result in a job review being rescheduled earlier than expected.
2. Prepare the form correctly. Performance appraisal forms should be designed so that exemplary as well as unsatisfactory work is noted. This can be done with a rating scale; i.e., "1-5" categories, or by using other numerical formulas. Leave sufficient space to note formal, objective problems in specific details. In addition, provide a space at the bottom of the document for both the supervisor's and employee's signatures indicating that both have read the evaluation and agree with it.

NOTE: Executive or management performance appraisal forms or guidelines for review may be different from those given to non-management employees.

3. Train supervisors to prepare appraisals correctly. Instruct them to draft their remarks clearly and objectively and avoid stating conclusions rather than facts. For example, a sleeping incident should be reported like this: "Employee was observed with his head resting on his desk and his eyes closed for ten minutes; he did not respond to me when his name was spoken in a normal tone of voice," rather than: "The employee was observed sleeping on the job." If contested in an arbitration or litigation, the first example would be less likely to be construed as a biased, subjective remark.

TIP: All reviews should be supported by documentation where available since it is always helpful to back up your general assessment of performance with specific examples. It's much more meaningful to talk about the details of the employee's performance on a specific project than to simply say the work was generally good or poor. Also, think about the review as a tool for helping the person improve already acceptable performance.

4. Avoid playing favorites. Supervisors must apply the same standards to all employees, regardless of race, color, age, sex or national origin. If an Asian or female employee, for example, is warned about excessive tardiness, while white, male employees with the same record are not, a charge of race or sex discrimination may materialize.
5. Discuss all problems with higher level supervisors before discussing the performance appraisal with the employee. Employers should monitor the implementation of the perform- ance appraisal system. One way of doing this is to have each appraisal reviewed by a higher level supervisory employee before it is presented to the employee.
6. Familiarize the employee with the appraisal process before formal discussion. Good supervisors provide employees with copies of an employee's job description, goals and standards previously established for the performance period before the meeting. The employee should be requested to evaluate his/her own performance prior to the review. Then, employee and management should sit down and compare evaluations. This will stimulate discussion and the process can help the employee identify any gaps in expectations.
7. Develop uniform policies with respect to employees who are given unsatisfactory reviews. For example, if performance is unsatisfactory (as defined by your company in a specific manner), an employee should be given written notice of the need to improve performance, including specific steps to correct all problems. During that time you may wish to place the notified worker on 30 or 60 days' probation. If at the end of the probation period the employee's performance has not improved to the satisfaction of the supervisor, then other corrective action may be taken, including suspension without pay or termination.
8. Always respond to criticisms of the appraisal by the employee. If the employee refuses to sign the appraisal, this should be noted. If the employee attaches a statement which disagrees with the supervisor's remarks, upper management should be alerted and a response prepared immediately.

Counsel Comment #91: Unless a response is formulated, dated, attached to the appraisal, and a copy given to the employee, the company might be construed as agreeing with the contents of such remarks.

9. Keep the contents of all appraisals confidential. Only executives and supervisors who need information about employees when considering them for promotions, transfers, progressive discipline and/or discharge should be allowed to view employee performance records. For example, if it is later proved that key information contained in an appraisal was false (e.g., "It appears that the employee has a drinking problem") and it was read by non-essential third parties, the company could be subjected to a lawsuit based on defamation, and be liable for a significant amount of damages.

Counsel Comment #92: A clear, concise statement on company policy regarding the disclosure of the contents of personnel files may reduce employee fears on the subject. Although not legally obligated in many states, some companies permit employees to see copies of material in their personnel files and draft corrections of any disputed information in their files, including performance appraisals. If this is permitted, allow the worker to view his/her file only in the presence of a supervisor. Additionally, note that it may not be a good idea to allow workers to make copies of all materials since damaging evidence may be introduced against the company in the event of a lawsuit.

The same degree of care with appraisals should be applied to all interoffice correspondence since the circulation of confidential memoranda within a company has given rise to lawsuits, particularly where the employer did not take adequate precautions to determine whether derogatory information was accurate. Limit information in personnel files, applicant information, credit references, etc. to key personnel who require access, and establish controls about the kinds of documents that are contained in such files. Always maintain tight control over such information for additional protection.

Is an employee entitled to periodic job reviews? Maybe in certain instances, particularly if language in a company handbook is specific enough to constitute a binding promise under the laws of some states. Although it is a good idea to state your performance appraisal policy in a company handbook as a statement of general company policy, never draft language which can be construed as an actual offer or commitment to regular job reviews.

Counsel Comment #93: Be sure that language in your performance appraisal section refers to the company's employment-at-will policy and that the company reserves the right to make decisions related to employment in any manner other than as provided in the handbook.