Bernard J. DiMuro, Jonathan R. Mook, and Michael E. Barnsback, Editors
DiMuroGinsberg, P.C.

Vol. 19, No. 11
December 2007

EVALUATIONS

Rewarding (and recording) your employees' annual performance

Michael E. Barnsback

As the year-end approaches, many employers have begun conducting annual performance evaluations. Although most of us use performance evaluations, how much thought do we put into the process? This article's purpose is to alert you to the dangers of a poorly conducted evaluation and provide some tips on how to avoid problems.

Critical evidence in most discrimination cases

When you're going through the evaluation process, one of the most important things to keep in mind is that written evaluations become critical evidence in almost all employment discrimination cases. In the typical discrimination case, the employee claims that she was fired for a prohibited discriminatory reason, and the employer defends the case by pointing to the performance problems that led to the termination decision. Both sides look to the written evaluations for evidence to support their positions.

The employee looks to the evaluations for comments praising her performance. More important, she'll use the evaluations to show a historic pattern of praise or absence of criticism as proof that the current criticism is nothing more than a pretext to conceal a discriminatory motive. Further, she may attempt to use subjective comments about her performance to show bias. Typically, those subjective comments are compared to the comments made about similarly situated employees outside her protected class to show bias toward the employee. For example, in an age discrimination case, comments about a protected employee's "lack of energy, drive or desire" compared to comments about a younger employee's "enthusiasm or motivation" potentially can be used to show a subjective bias against the older worker.

Conversely, the employer will hope to use the evaluations to show a long history of criticism and failed attempts by the employee to correct problems with her performance. That evidence is best developed through objective performance criteria and specific, objective criticisms.

As evidence in a discrimination case, performance evaluations can be a double-edged sword. You must be careful not to sharpen the employee's edge inadvertently.

Evaluations as retaliation

Until recently, a poor performance evaluation in and of itself didn't constitute a retaliatory act by an employer. According to the Fourth U.S. Circuit Court of Appeals (which covers Virginia), a poor performance evaluation was actionable (or legally pursuable in court) only when "the employer subsequently uses the evaluation as a basis to detrimentally alter the terms or conditions of the recipient's employment." In other words, unless the evaluation was used as the basis to demote, terminate, or otherwise adversely affect the employee, a bad review alone wasn't enough to create a retaliation claim. James v. Booz-Allen & Hamilton, Inc., 368 F.3d 371, 377 (4th Cir. 2004).

In a 2006 decision, the U.S. Supreme Court expanded the scope of retaliation claims. Under the new standard, an individual "must show that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have 'dissuaded a reasonable worker from making or supporting a charge of discrimination.'"In the context of performance evaluations, if under the reasonable employee standard receiving a bad performance evaluation would discourage an employee from engaging in protected activity, then the evaluation may create a claim for retaliation. Burlington Northern & Santa Fe Railroad Company v. White, 126 S.Ct. 2405,2415 (2006).

Defamatory evaluations

Both the individual author of a performance evaluation containing malicious false statements and the employer can be held liable for defamation. The key to the analysis is whether the alleged defamatory statement contained in the evaluation is a demonstrably provable fact as opposed to a pure expression of opinion. For example, a statement that an employee wasn't always at work on time is actionable because its truth or falsity can be proved. On the other hand, a statement such as "the employee didn't show initiative" is a matter of opinion that isn't actionable as defamation.

By statute in Virginia, an employer has qualified immunity for information contained in written performance evaluations shown to a former employee's prospective or current employer, provided that the employer didn't act in bad faith.Bad faith can be proved by demonstrating that the employer disclosed the information knowing that it was false or with reckless disregard for whether it was false or with the intent to mislead.

Tips to stay out of trouble

• Be objective. Base performance evaluations on objective or measurable criteria. Avoid subjective evaluations.
• Be consistent. Make sure that all individuals performing reviews conduct them in a consistent manner.
• Manage employees' expectations. Nothing in the written review should come as a surprise to the employee. Communications, both verbal and written, throughout the review period should alert the employee to performance issues before the review is conducted.
• Be accurate. Don't over-or underevaluate an employee. Inflated evaluations create unrealistic expectations for the employee and inadvertent evidence of good performance.
• Establish clear and measurable goals. If there are performance problems, include an action plan that addresses the issues and sets timetables and measurable goals.
• Review the evaluations. One person or group should review all evaluations before they are presented to the employees. That review helps to ensure consistency in the process. It also serves as a check for the factual statements made in the evaluations.

Copyright 2007 M. Lee Smith Publishers LLC

VIRGINIA EMPLOYMENT LAW LETTER is a monthly publication provided as an educational service only to assist lay persons in recognizing potential problems in their labor and employment matters. It is not meant to be construed as legal advice. Readers in need of legal assistance should retain the services of competent counsel.