Ten Questions: How to Conduct Performance Reviews without Legal Exposure

with Kristin L. Wedell, Chair, Employment and Labor Law Group

Performance reviews are meant to boost productivity, clarify expectations, and help employees grow — but when not handled properly, they can also expose employers to significant legal risk. In today’s workplace, understanding the legal implications of performance management is more important than ever.

Kristin L. Wedell has over 25 years of experience in the areas of business and employment law, civil rights, workers’ compensation, and product liability and is a Certified Specialist in labor and employment. In this interview, she explains how to conduct performance reviews that are both effective and proper. Whether you manage a small team or oversee a large organization, this conversation offers practical guidance to help you turn performance reviews into a valuable management tool — without creating unnecessary legal exposure.

1.  Why do performance reviews create potential legal risks for employers?

Performance reviews become legal risks for employers when they are used as evidence in wrongful discrimination actions or retaliation claims because inconsistent and inaccurate or biased reviews that contradict other employment actions could be used to show patterns of unfair treatment. As you can imagine, a performance review is usually Exhibit One when it comes to discovery and especially in deposition. So anything written in that performance evaluation will be carefully scrutinized by a judge and a jury.

2.  What are some of the most common ways employers run into legal trouble in conducting performance reviews?

One of the most common ways that employers get into trouble when they are conducting performance reviews is when they are inconsistent. For example, if you are inconsistent in how you rate employees differently without being objective, you will be asked, “Why did you rate these individuals as a three on a performance evaluation versus a five?” And if you really cannot answer the question, one of the things that the judge and the jury will look at is, “What is the reason? Is it because they are a member of a protected class?” One of the most critical things for employers that run into legal trouble is that the documentation just is not there to support the decision. For example, if you fire an employee for poor performance, but yet your previous performance evaluations are all stellar, then it does not make sense. So if you fail to record the poor performance on an evaluation, yet you use that as a basis for termination, you can run into trouble.

3.  What legal considerations should employers keep in mind when drafting performance review forms?

As for the form itself, you have to use job-related criteria. It has to be objective and not subjective. You should have a standardized form across every department to make sure that the criteria for which the employee is being measured is fair. And never, ever reference age, disability, gender, or anything like that in the form. You should also include space for employee comments and acknowledgement, because if you allow the employee to provide feedback, it can be helpful in defending the employment decision as well and really see that the review was performance-related. If there was a performance problem or poor performance that was discussed with the employee, and the employee acknowledged that, it can be helpful to the employer down the road.

4.  Speaking of feedback, how can managers phrase critical feedback in a way that is constructive but does not lead to legal action from the employee?

You have to make sure that the feedback is constructive. It has to focus on behavior and use facts and examples, such as “missed three deadlines” instead of saying that someone is “unreliable.” Unreliability is hard to measure, but if you are using facts, such as a specific number of missed deadlines, that is important. And you should link the feedback to job expectations or goals. It should be based on a particular job. If there were time management issues, you could say, “Needs improvement in time management,” instead of “Fails at deadlines.” Avoid absolute language. And, of course, never tie performance to any assumptions about someone’s age or health.

One of the things that we are counseling clients and employers on is how to reduce the likelihood that somebody feels that they are targeted unfairly and to balance the performance review with positive comments. If you are going to include criticisms and things that need to be worked on, also be sure to reference positive attributes.

5.  What are best practices for keeping performance reviews free from bias, either implicit or otherwise?

One thing that I would highly recommend is a standardized form so there is no danger of implicit bias — and use objective data such as metrics, attendance, outcomes, sales quotas, and other things that can be objectively reviewed. Also, if at all possible, you should have multiple reviewers providing feedback and reviewing the forms and the completed evaluations and review them for consistency. Human Resources (“HR”) should really take a hands-on approach to looking at the evaluations for consistency across teams or protected classes to see if there is the danger of a particular reviewer having an unintentional bias towards someone or a group of individuals that might be in a protected class. So, the more people that you involve in the process, the better.

6.  Speaking of protected classes, how should employers handle performance reviews for employees who are on protected leave (e.g., FMLA, ADA)?

This is a sticky area because, if you have an employee that is up for their performance review but happens to be on protective leave, you could still complete an evaluation once they return to work. But you have to be careful because you do not want to penalize that employee for the time that was missed while they were on protected leave. If they had a sales quota, for example, or certain goals that were not reached in a given year, but that individual happened to be on FMLA or ADA leave, you have to be careful not to penalize them for not meeting a particular goal or expectation. If the review period includes the time that they were on leave, you can note that in the evaluation just to clarify any future potential impact.

For example, if the person had a sales quota but was gone for three months and happened to fall short of their goal, it is fine to mention that the employee was on leave so that the employee is not unfairly penalized. Also, do not make any assumptions about future performance. For example, if someone is out on ADA leave or FMLA leave and you are aware that they have a medical condition that may require ongoing treatment or accommodations, do not use that to make assumptions about how that individual is going to perform in the future.

7.  What steps should be taken if an employee disputes their performance review?

As you can imagine, there are times when the employee disputes their performance review, so you should encourage open communication. Meet with the employee to discuss their concerns or to clarify any misunderstandings. One thing that you should do is to make sure that you have a formal process for handling situations like that. Allow the employee to respond in writing, which is really helpful, and then you can meet with the employee to discuss what they have written and their concerns. If this is handled by a supervisor, let HR review the dispute and see if there are any inconsistencies or bias. And of course, keep all documentation! Make sure that you document the communications, when they occurred, what was discussed, and if there were any decisions that were made as a result.

8.  What training should managers receive before conducting reviews to minimize legal risk?

I think that managers, especially those that are going to be actively participating in performance evaluations and making recommendations as far as compensation, discipline or termination, really should have anti-discrimination and bias training. It should not be left just to the head of HR to have this training, because you have to make sure that the managers who are involved have the tools that they need to make sure that they are handling these performance evaluations fairly and have a general understanding of employment laws such as the ADA, FMLA, or Title VII. They do not have to be lawyers, but they should know that these laws exist and they just have to be careful to evaluate individuals fairly.

Also, it is very difficult for some individuals to deliver negative feedback in a performance evaluation. So if you have your supervisors or your managers conducting the reviews, they should be encouraged to take an interpersonal communications class. It would be helpful in being able to discuss a negative evaluation with an employee so that they would be able to discuss negative evaluations or performance issues with employees clearly and without unnecessary personal feelings or emotion if the dialogue goes south.

9.  How does remote or hybrid work scheduling impact performance reviews?

This is still, of course, a hot topic when it comes to employee-employer relations, and the most important thing is to make sure that there are clear expectations and requirements for remote work. Do not just have the conversation when someone is hired. Make sure that requirements are communicated clearly to the employee so that they know what is expected of them — because you really have to ensure equal treatment for in-office and remote staff to avoid discrimination claims. You can use technology to track performance, but performance should be measured by objective criteria and not just the hours in the office.

10.  What are the emerging trends or legal developments employers should be aware of regarding performance evaluations?

As you can imagine, the number one trend that employers should be aware of when they are looking at performance evaluations is the use of artificial intelligence (“AI”). You have to be very, very careful, because there are concerns about bias in the AI algorithms. And there are employers that are even going so far as to use AI software with facial recognition, which I think is a huge problem because I don’t know if there is really a need to have facial recognition of a particular employee in order to evaluate their performance. So you have to be really careful when using AI in performance reviews.

Also, AI is relatively new and has not been trained on how to evaluate employees. AI certainly does not take into account soft skills such as teamwork and problem-solving. So I really would caution employers and HR professionals that are using AI exclusively to either prepare their performance evaluations or evaluate the data that is obtained when making recommendations about employment decisions.

For more information, contact the Employment and Labor Law Group at Dickie, McCamey & Chilcote, P.C.

Kristin L. Wedell 216-685-1827 kwedell@dmclaw.com