The Corporate Trend to Eliminate Performance Reviews Could Create Difficulty Defending Employment Discrimination Lawsuits

A new trend to modify or eliminate the traditional performance review is being led by major companies, such as Accenture, Adobe, and Gap, who have eliminated the traditional performance review, and General Electric, perhaps the country’s most influential corporation, who has recently decided to overhaul how it handles reviews.[1]  Corporations are moving away from traditional performance reviews to accommodate or better relate to the newer generation of employees, lighten the growing burden on managers, and save significant cost by modifying or eliminating performance reviews.[2]  While nearly ten percent of Fortune 500 companies have eliminated traditional performance reviews, the current trend may see that number double in the next year.[3]  As the performance review landscape changes, however, that shift could have a profound impact on employers when defending discrimination lawsuits.

Elimination of Performance Reviews Will Affect Employers Defending Discrimination Claims 

In employment discrimination law, after the Plaintiff has shown a prima facie case of discrimination,[4] the company must then provide a legitimate, non-discriminatory reason for the adverse employment action.  More often than not, such a reason is found in the employee’s performance reviews, which allow an employer to acknowledge an employee’s strengths and identify employee developmental areas.  A well thought out performance review, especially for those companies that allow their employees to self-evaluate, may be used in litigation to show a continuing trend of poor performance, support management’s decision to put an employee on a performance improvement plan, and serve as the basis for suspension.  However, performance evaluations can be difficult for managers who are not forth coming with an employee’s true performance throughout the year, which makes establishing a poor performance defense in litigation complicated.  In many employment cases, without a performance evaluation there may be no documents to support management’s decision or to show a downward trend in an employee’s performance.  If the current trend holds and managers are no longer required to complete performance reviews, there exists a strong possibility that the employer will struggle in defending employment lawsuits to put forth convincing evidence to show that it had a legitimate, non-discriminatory reason for why it took adverse action against the employee. 

Employer’s Response to Eliminating Performance Reviews

If your company follows the trend and eliminates performance reviews, it must ensure that management and human resources are kept abreast of the employee’s true performance.  Scrupulously noting performance problems in the employee’s file and following company policies regarding when to issue verbal or written warnings will be critical for employers in the event that litigation arises.  Keeping track of such issues would serve as the key portion of evidence for the employer to properly defend against the lawsuit and show that its reason for taking action against the employee was based on a legitimate, non-discriminatory reason.  Failing to keep such documentation, coupled with eliminating the performance review, may result in disaster in the courtroom as the company tries to convince a jury or judge that the action taken was legal.  Companies following the new trend should review and revise existing policies or design new policies to ensure that managers and human resources are properly documenting employee performance issues throughout the year and keeping the documentation in electronic and/or hard copy format.

[1] Lillian Cunningham and Jena McGregor, Traditional Performance reviews on their way out, The Washington Post (Aug. 23, 2015), www.denverpost.com/business/ci_28683218/traditional-performance-reviews-their-way-out.

[2] Id.

[3] Id.

[4] In order to state a prima facie case of employment discrimination under Title VII, the plaintiff must show: (1) he or she belongs to a protected class; (2) he or she was qualified for the job; (3) he or she suffered an adverse employment action; and (4) he or she was treated less favorably than others not in the protected class.  Sanchez v. Denver Pub. Sch., 164 F.3d 527, 531 (10th Cir. 1998).  

 

 

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