Legal Guidelines for Conducting Employee Evaluations

Employee Evaluations December 21, 2015 By: Maurice Baskin

When done well, performance evaluations can promote professional growth and offer motivation for employees, while at the same time providing liability protection for the association.

Association executives must at times consider reducing staff size in order to maintain 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 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. In these situations, 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 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 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.

Develop the Right Appraisal Form

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 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 or her performance of each aspect separately.

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

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 a signed statement from the evaluator that he or she 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 familiar with both the employees' job duties and how the employees perform these duties.

Develop a Rating Scale

The employee should be appraised in terms of how well he or she behaves in performing each job duty and how well that 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 or she arrived at the rating.

The performance appraisal should be directly related to the employee's job description or detailed job analysis.

Thus, with regard to a general trait such as resourcefulness, the choices available to the rater might range from a lowest rating of "unable to solve problems unless given specific guidance" to a highest rating 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 that 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.

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 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 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, where 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. However, such relative rankings are based 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 that compare the person’s performance to what is expected—without any effort to compare his or her 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 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.

Ensure Against Evaluator Bias

Associations should emphasize the EEO aspects of employee evaluations in training evaluators, and should caution them against stereotyping employees based on race, sex, age, or 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 they consistently rate women or minorities lower than other employees or use language that reflects bias or stereotyping.

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.

Provide for Employee Agreement

Providing a way for the employee to agree that the job duties on which he or she has been rated constitute and accurate and complete list of his or her major job duties 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 the duties, the employee should be required to explain the disagreement.

Require Employees to Sign Their Evaluations

The employee should be given an opportunity to comment on whether he or she agrees with the evaluator's performance assessment and, if not, to explain the disagreement. The employee should be required to sign the evaluation, even if he or she 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 or she previously agreed.

Provide for Appeals

Giving the employee a right to appeal a 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.

Establish an Evaluation Schedule

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. It is often advisable to provide for more frequent evaluations of new employees or employees who, for some other reason, are on probation.

If the evaluator moves to another job or leaves the association, he or she should be required before leaving to complete an evaluation of all his or her employees 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 gaps 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.

Review Performance Evaluations for Adverse Impact

If performance appraisals are used as the basis for personnel selection decisions—such as promotions, transfers, or decisions to lay off or discharge employees rather than retain them—the evaluations are subject to the federal Uniform Employee Selection Guidelines. In other words, if the selection process has an adverse impact on protected groups, each component of the process, including the performance appraisal, 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.

Follow Procedure Carefully

Follow established procedure 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, while at the same time being sure to follow all established procedures.

Maurice Baskin

Maurice Baskin is a former partner at Venable LLP in Washington, DC.