Dear Rita: I just started as the first HR Manager for an environmental nonprofit that has grown to 65 employees, although at least 35 of them are summer staff. I was somewhat shocked to discover that there are no performance evaluations in the files! When I asked the ED about this, she said two things: a) seasonal employees don't need to get evaluations, and b) that regular employees work mostly in teams and that they've worked together for a long time. When I recommended a formal performance evaluation process the ED said she would only do it if legally required. So my question: are performance reviews legally required? Signed, New Kid on the Block.
Dear New Kid: First, there is no law that mandates employers conduct annual performance reviews. But I assure you that the most common words uttered by employment attorneys are "document, document, document." (I don't know why we say it three times -- perhaps it goes back to the old days when documents were carbon copied in triplicate). When evaluating the potential for legal liability related to an adverse employment action, it is an employee's performance review -- or lack thereof -- that is the first document an employer looks to for direction.
A well-drafted and thorough performance review is the foundation of all legally defensible employment decisions; so while the law may not mandate reviews, every employment attorney worth their exorbitant hourly rate will advise you to do them. I have also occasionally run across a governmental grant that requires the employer to adopt a specific personnel system for workers on the grant, so you should also review any grant conditions to see if that may provide you the legal impetus you are seeking.
Many employment laws are subjective
As an HR professional, I am sure you appreciate that many employment laws are subjective. For example, suppose you have terminated an employee due to poor performance, and that employee is either covered by one of the protected classifications (race, age, religion, sex, disability, pregnancy, etc.) or had recently taken protected action (filed a client abuse complaint, took protected family leave, filed a workers compensation claim, etc.). As you can see from this list, every employee is in a protected classification because everyone has a race or gender, and many employees have exercised legally protected rights. If the employee brings a lawsuit that claims that the termination was due to discrimination or retaliation, how will you demonstrate that the decision was based on performance and not on something else?
Discrimination and retaliation are essentially unequal treatment of similarly situated workers where the unequal treatment was not based on a legitimate business reason or need. If you can show that all employees were evaluated based on standardized job-related criteria, and that this particular employee failed to meet that required standard, you will have gone a long way towards defending the decision. More importantly, employees who feel they are treated fairly are not likely to sue in the first place.
This applies equally to seasonal employees, as each year your agency makes a decision who to hire. If a former employee applies and is not offered re-employment for performance reasons that could be the basis of a discrimination complaint. Thus, you need to have some documentation of the performance deficiencies exhibited by this seasonal worker in the prior year to have a decent defense of the non-hire decision.
What do personnel files say about a person?
When I counsel our nonprofit members on the legal risks associated with a termination decision, one of the first questions I ask is, "What impression would I have of this employee if I just read her personnel file?" As a former trial attorney, I can assure you that juries want to see documentation that an employee was put on notice of performance deficiencies and provided specific examples of unacceptable work/conduct, and provided the necessary training and time to correct the behavior.
Since almost every juror is/was an employee, regardless of the legal standards at issue, they are more likely to give credence to an unlawful motivation put forward by an employee if the principles of fundamental fairness are not followed when the employee was terminated. The old adage, "A good termination should come as no surprise," is based on this principle.
But what if you have a long-term, satisfactory employee whose performance takes a serious turn for the worse? In this instance, do not wait for the annual review to bring this issue up, but address it in a Performance Improvement Plan (PIP) or other written mid-year evaluation. I have attached a sample PIP for those nonprofits who would like to see a sample.
Of course, performance reviews can be a two-edged sword if a manager pressed for time rates every employee satisfactory every year, and does nothing more than check the boxes. For that reason, supervisors and managers should be evaluated on their ability to timely and thoroughly complete reviews. Typically, it is up to the HR Department to ensure that all staff, but especially managers, are supported and trained on conducting reviews, setting goals, and ensuring that these reviews accurately reflect work performance and behavioral concerns.
So it seems to me you've got a sales job ahead of you - one that requires you to assist the executive team in recognizing the value of the performance review not only to mitigate the legal risks associated with employment decisions as I've described above, but also as an essential tool to motivate employees, further develop the nonprofit's mission, and establish goals for individuals and work teams. Once you've got the buy-in from the executive team, it is essential that the entire agency receive training on the purpose and process of this new tool, with the goal of the agency to embrace performance review as an essential communication tool that is beneficial for staff and management.
Here is a sample Performance Evaluation and Performance Improvement Plan that you can modify. And if you'd like to read a great overview of the mechanics and process of establishing a Performance Review system, I encourage you to read the chapter on Performance Reviews in The Nonprofit's Guide to Human Resources by Blue Avocado Editor, Jan Masaoka.
See also in Blue Avocado:
Ellen Aldridge, J.D. is a Labor and Employment Risk Manager for the Nonprofits Insurance Alliance Group. Ellen has practiced labor and employment law for 21 years in both the public and private sectors - representing and advising management in wrongful termination, wage and hour, discrimination and sexual harassment cases. With Nonprofits Insurance Alliance Group, Ellen advises nonprofits with D&O insurance about employment issues - before they are sued - to help keep them out of court. Ellen claims to be very conscientious about doing performance reviews for her dog.