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Legal Guidelines for Associations for Conducting Employee Evaluations and Performance Appraisals

By: Maurice Baskin , Venable LLP
Source: Center Collection
Published: May 2002
Given the increasing number of lawsuits facing organizations brought on from former employees, a decision to terminate an employee (even under the best of circumstances) requires some care to ensure that the association is not exposing itself to significant legal risks. Often an employee's past performance evaluations, documented in writing, can serve as the association's best ally or its worst enemy as well as be an important tool for increasing employee morale, motivation, and productivity.
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Today's economic uncertainty has forced many association executives to at least consider reducing staff size in order to salvage the fiscal health of their organizations. While sometimes these staff reductions are true "reductions in force" not based on the performance of the affected individuals, but rather based on a decision to eliminate and/or outsource certain departments, often association executives will look to cut staff whose performance levels are below expectations. Of course, a decision to terminate an employee for cause must be made only after great care is taken to ensure that the association is not exposing itself to significant legal risks. When calculating these risks, an employee's past performance evaluations -- documented in writing -- can serve as the association's best ally or its worst enemy, depending on how effective and accurate those evaluations are.

Conducting proper employee evaluations is not only important for associations that want to minimize their risks when defending employment decisions that are attacked in "abusive" or "wrongful" discharge cases, equal employment opportunity ("EEO") charges, and arbitrations. When properly planned and conducted, employee performance evaluations or appraisals also can be an important tool for increasing employee morale, motivation, and productivity. On the other hand, improper employee evaluations can actually be used against an employer and can subject the employer to an increased likelihood of litigation. In addition, the employee evaluation process may be subject to the Federal Uniform Employee Selection Guidelines, 29 CFR Part 1607 (see specifically Sections 2(B)-(C), and Sections 4(C)(D) and (E)).

The following are some practical guidelines for associations in developing and implementing an employee performance evaluation or appraisal system that will meet these practical and legal criteria:

1. Develop an Appraisal Form that Relates Specifically (or Can Be Adapted to Relate Specifically) to the Employee's Job

The most important step in the development of a good performance appraisal form is the development of an accurate and detailed job analysis or, at least, a good job description. The performance appraisal should then be directly related to the employee's job description or detailed job analysis, which should be incorporated by reference . In the best situation, the performance appraisal should include specific references to each aspect of the employee's job analysis or job description and rate the employee in his performance of that aspect separately.

The evaluation should also distinguish between major and minor components of the job. For example, if your job evaluation results in a "point" rating, the employee should be able to earn more points for good performance in the major aspects of his job, and less points should be allocated for those aspects of the job which require a minor degree of the employee's ability or skills, education, or time. Thus, if "written communications" are only a minor aspect of the employee's job, fewer maximum points should be allocated to this aspect of the employee's appraisal than to an aspect of his job which requires a major part of his efforts, such as "dexterity in handling tools."

2. Train the Evaluators

An employer may have a top-notch appraisal form, but that form is not worth much if the individuals using it are not properly trained. The evaluators should be given written instructions on the purpose and mechanics of the performance appraisal system, emphasizing the importance of accuracy, and including information on the potential EEO problems and directions on how to relate the performance appraisal to the job analysis or job description. Associations should update these instructions and require evaluators to review them before each series of evaluations. It is important to document that this has been done by, for example, requiring some signed statement from the evaluator that he has reviewed the instructions.

Written instructions should be supplemented by group training for evaluators to teach them how to rate employees. This exercise should be helpful in addressing common questions or concerns of evaluators. Also, group training helps the employer lessen the disparity among evaluators.

In addition to written and in-person training regarding the evaluation process, associations should be certain that each evaluator is very familiar with both the employees' job duties and how the employees perform these duties.

3. Develop a Rating Scale

The employee should be appraised in terms of how well he behaves in performing each job duty and how well his performance reflects a particular job-related trait. Typically, the evaluator will be allowed to rate the employee's behavior as falling in one of three to five levels, with the lowest level translating to "unacceptable" and the highest level translating to "exceptional." It is preferable, however, to develop ratings that are more descriptive and better tailored to the job, and to provide space in which the well-trained evaluator can describe more specifically, if appropriate, how he arrived at his conclusion. Thus, with regard to a general trait such as "resourcefulness" the choices available to the rater might range from a "lowest" rate of "unable to solve problems unless given specific guidance" to a "highest" rate of "frequently develops creative and original solutions to unexpected and unusual problems," with two or three other degrees in between. This type of specific rating system ensures greater accuracy (particularly with regard to ratings of general traits) than a system which simply rates the employee from unacceptable to exceptional with no explanation of what is meant by "exceptional" resourcefulness; and no explanation of how "resourcefulness" might be manifested in the employee's job.

Also, the appraisal should be based on observed evidence. There should be a blank for "not observed" or "inapplicable" for the evaluator's use where appropriate.

4. Safeguard against Inaccuracy

By far the most typical problems that affect the accuracy and reliability of evaluations include a tendency on the part of evaluators either to be too "easy" on employees, to give everybody a "middle of the road" ranking, or to form a general impression of the employee and give that rating to all aspects of the employee's performance, without distinguishing the employee's strong points from his weak points. The evaluator should be cautioned about these potential errors and trained on how to avoid them.

Another safeguard against inaccuracy can be a requirement that the evaluator provide "relative rankings" (e.g., employees are ranked against each other by ranking all employees from best to worst in terms of job performance, or by placing roughly the same number of employees into each of several performance distributions such as upper, middle, and last third). This may be particularly useful where appraisal scores are used to establish merit wage increases. Such relative rankings are based, however, on the assumption that employee performance will conform to a normal distribution curve. This assumption will not always be true since detailed training and the degree to which poor performers have already been weeded out by discipline may tend to "level out" the normal curve.

In the other major type of ranking system, the employee's performance is simply explained in the evaluator's own words or in scores which compare his performance to what is expected -- without any effort to compare his performance with that of other employees. Obviously, unless highly developed, this system is more subject to the rater's tendency to "go easy" on employees or to score them all at the same level. Accuracy can be improved if this type of appraisal is tied to specific job-related criteria, and/or lists of job duties and job-related traits. A "mixture" of the best of these systems can be achieved if deviations from what is expected are demonstrated in graphs from which comparisons of employees are drawn.

5. Ensure against Bias of the Evaluator

Associations should emphasize the EEO aspects of employee evaluations in training evaluators, and should caution evaluators against stereotyping employees based on race, sex, age, or any other characteristics. Actual observed performance should be the characteristic evaluated.

In order to guard against trouble in this area, employers should monitor the evaluations performed by each evaluator and determine whether that evaluator is consistently rating women or minorities lower than other employees, or is using language in performance evaluations that reflects bias or stereotyping.

6. Provide for Cross-Checks on the Evaluators

Generally, the reliability of the appraisal system is enhanced if two or more individuals separately review each employee, or if the first reviewer's evaluation is reviewed by another evaluator who also signs off on the review form. The second evaluator should also have personal knowledge of the job duties and performance of the employee being rated.

7. Provide for the Employee's Agreement that the Job Duties on Which He Has Been Rated Constitute an Accurate and Complete List of His Major Job Duties

This can prevent later debates about whether an employee was expected to perform a particular aspect of the job being evaluated. If the employee disagrees with the evaluator's statement of his duties, he should be required to explain how and why he disagrees.

8. Require Employees to Sign Their Evaluations after Giving Them an Opportunity to Review the Evaluation and to Comment in Writing

The employee should be given an opportunity to comment on whether he agrees with the evaluator's assessment of his performance, and if not, on how and why he disagrees. The employee should be required to sign the evaluation, even if he disagrees, and care should be taken to ensure that the employee's signature is dated. This will help to establish the beginning of a statute of limitations for filing complaints relating to the evaluation and will also undermine the employee's attempt to attack an evaluation with which he previously agreed.

9. Provide for Appeals on Grievances

Giving the employee a right to appeal his performance appraisal to a higher level of supervision enhances the employee's perception of the job evaluation process as fair and promotes good employee relations, so long as the higher level review is not a "pro-forma" review. Failure to exercise this right of appeal may be damaging to the case of any employee who later attacks the evaluation in an EEO or wrongful discharge claim.

Also, a right of appeal provides another means by which the employer can assess whether or not supervisors are doing a good job of performing the evaluation.

10. Timing of Evaluations

A schedule for job evaluations should be established. It is often advisable to provide for more frequent evaluations of new employees or employees who, for some other reason, are on probation. The timing of the evaluation should depend on factors such as the purposes for which it is used and administrative convenience. There should be strict adherence to the evaluation schedule established.

If the supervisor/evaluator moves to another job or leaves the association, he should be required before leaving to complete an evaluation of all his employees for the period of time he supervised them since their last evaluation. Further, if an employee changes jobs and moves to another supervisor, his former supervisor should complete an evaluation of the employee as of the date of the transfer. This will prevent "holes" in the evaluation process, and consequent employee complaints that they have not received timely or complete evaluations.

Remember that inconsistency in the timing of evaluations can, like any other inconsistency in employment actions, become the basis for an EEO charge or undermine the employer's reliance on evaluations in its defense of EEO or wrongful discharge cases or arbitrations.

11. Review Performance Evaluations for Adverse Impact

As stated above, if performance appraisals are used as the basis for personnel selection decisions, such as promotions, transfers, or decisions to lay off or discharge an employee as opposed to retaining that employee, the evaluations are subject to the federal Uniform Employee Selection Guidelines. In other words, if the total "selection process" has an adverse impact against protected minorities or females, each component of the selection process, including the performance appraisal or evaluation, must be independently evaluated for adverse impact. If it is determined that the performance appraisal is causing an adverse impact, the employer must be able to demonstrate its job relatedness. If the appraisal cannot be "validated" through a showing of job relatedness, the adverse impact must be eliminated through changes in the evaluation or the procedures by which it is implemented.

12. Follow Whatever System or Procedure Has Been Established to the Letter, and Carefully Refrain from Any Actions or Statements in Performance Evaluations that Connote a Guarantee of Continued Employment

Courts are increasingly finding ways in which employers can be held to have made binding, contractual commitments to their employees. Evaluators should be careful to avoid making such commitments to their employees, while at the same time being sure to follow carefully all previously stated procedures.

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