When several women recently sued Goldman Sachs & Co. for gender discrimination, the plaintiffs pointed to the financial giant’s job evaluation process as one of the areas where female employees were treated illegally. Currently, the plaintiffs in that lawsuit, which was filed in September in a New York federal district court, are seeking class-action status.

The firm used 360-degree performance evaluations, where supervisors, peers, and subordinates offer their feedback as part of the job review process. At Goldman Sachs, male managers allegedly chose entire groups of men to evaluate female employees. Because the evaluation was done primarily by men, women typically “receive lower 360-degree review scores, more negative reviews and lower quartile rankings than men in similar positions who have delivered similar or worse objective performance,” the complaint alleged.

The lawsuit is not the first to use a company’s job evaluation process as evidence in a lawsuit. Unfortunately, job evaluations tend to be a painful experience at many companies. It is often hard to say who enjoys it less - those who are evaluated or those who have to conduct the evaluations.

Nonetheless, companies that allow managers and supervisors to rush through the evaluation process or fail to follow proper protocol expose themselves to legal problems. They also miss the opportunity to offer valuable feedback and help workers set goals, identify areas that need improvement, and determine whether employees deserve bonuses, raises, or promotions.

In reality, job evaluations are rarely done in an ideal environment. A thorough job evaluation takes a lot of time. It can also be an emotional process, since it’s not always easy for managers and employees alike to remain calm and objective throughout a process that is fundamentally a critical one. When employees are merely adequate or excel in one area but are floundering in others, it can also be difficult for evaluators to find a fair middle ground.

While it may be difficult to do job evaluations well, mismanaged job reviews can lead directly to lawsuits. As we approach the end of the calendar year, the season of most job evaluations, organizations need to take the process seriously, plan ahead, and make sure everyone involved knows what is expected of them.

WHEN EVALUATIONS BECOME EVIDENCE

The Goldman Sachs case is just one example of how a job evaluation can help lay the grounds for a lawsuit. There are many ways that poorly conceived or executed evaluations can come back to haunt employers.

• Defamation
Negative job evaluations have been the basis of defamation lawsuits. One employment defamation case in Virginia has been before the state Supreme Court twice. In that case, a former employee is arguing that she was defamed during her job reviews. The employer, Raytheon Technical Services, and its president have argued that the remarks were not defamatory because they were true.

In the latest go-round, the Virginia Supreme Court ruled that employees can be defamed during job evaluations if comments that are not true are included with those that are matters of opinion or are partially true. In defamation cases, the use of one or two words may present the basis for a lawsuit. For example, one of the major areas of contention in the Raytheon case involves the words “significant” and “significantly,” which were used in Hyland’s job evaluations to describe the negative impact some of her performance issues allegedly had on the company.

Employers need to provide guidelines to its supervisors who conduct job evaluations, setting out the proper language to be used and educating them on the proper use of opinion and facts.

• Discrimination
As the Goldman Sachs case proves, job evaluations can also be used as evidence in support of a discrimination claim. In another case, a North Carolina school system recently settled a lawsuit with a former principal who had alleged racial discrimination and retaliation, among other things. According to a news report, the principal, who is black, had been forced to retire. In her complaint, she alleged that her performance evaluation pointed out several deficiencies, but that white principals with the same deficiencies were not asked to retire.

Employers with evaluation processes that do not comply with all federal and state anti-discrimination laws, including Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act, may find themselves the subject of a regulatory investigation or in the midst of a legal battle.

• Compensation
According to the U.S. Equal Employment Opportunity Commission (EEOC), compensation discrimination, which is perpetuated through job evaluations, is an ongoing problem in the workplace.

As a hypothetical example, the EEOC describes an employer who has developed a job evaluation study that includes compensation guidelines. If Hispanics have most of the jobs in a certain pay grade, while similar jobs held by mostly non-Hispanics pay more, that disparity could constitute compensation discrimination.

• Privacy
Employees can also claim a breach of privacy if job evaluations are made public or if managers discuss confidential information around other employees.

MAKING IT COUNT

Employers should take several steps to ensure that their evaluation processes cannot be used against them in a lawsuit. And beyond that, companies should think carefully about how to develop an effective evaluation process, allowing employees to come away with meaningful feedback and well developed goals.

While it is tempting to download a template off the Internet, evaluation forms and procedures should be customized, at least enough to take into account the specifics of the industry and the organization’s size. Goals and expectations must also be realistic for each company’s workforce.

Additionally, companies should consider the state and local discrimination laws where they operate. Legal counsel and human resources staff should periodically review the evaluation forms and procedures to ensure that these are in compliance with all relevant laws and regulations and do not leave a company vulnerable to a lawsuit.

Most organizations conduct job evaluations quarterly or annually. These evaluations should be conducted according to a well publicized timetable, so everyone knows when they will occur.

The process should be as transparent as possible. Managers and employees should understand who will conduct the evaluation, the criteria by which they will be judged, and how the evaluation results will be used. This is particularly true when it comes to compensation and bonuses, if those are based on performance.

Some job evaluation criteria are clearly objective, such as sales figures or number of goods produced. Others can be far more subjective. When possible, evaluators should include at least some objective criteria to ensure that the employees feel that the evaluation was fair.

Those who give job evaluations should also be coached on how to conduct quality evaluations. Evaluators should never get emotional or personal - they must remain objective and professional at all times. Evaluators should focus on positives whenever possible, but must also be able to calmly and clearly describe where employees can and should improve.

It is tempting to sweep problems under the rug as long as the employee is at least doing a generally adequate job. Unfortunately, sometimes issues snowball until they become unacceptable. An employee who has received positive, or even neutral, job evaluations will be stunned if she is suddenly disciplined or terminated for poor performance. This can lead to a lawsuit, and the employee’s attorney will be sure to include those neutral or positive evaluations as evidence that the employee was treated unfairly or discriminatorily.

Employees should also be given specific suggestions and guidelines about how to improve their performance where they are found lacking. Being told to “do a better job” can be extremely unhelpful, even for employees who are motivated to improve.

Managers should also identify the employee’s strengths and work with them to leverage their individual personalities and styles. An approach that may work very well for one employee may be a doomed approach for another.

During the evaluation meeting, evaluators should allow plenty of time to adequately discuss the results. They should also encourage employees to respond and ask questions.

Documentation is vital when conducting job evaluations. Companies must record everything, good and bad, and keep records strictly confidential. Each job evaluation should end with a section that sums up exactly how employees have performed since the last evaluation, what areas they need to work on, and what the goals and expectations are. With clear goals and expectations, employees understand exactly what is expected of them and how they can improve. If necessary, follow-up assessments should be done to document whether an employee has improved his or her performance in keeping with the goals that have been identified. These types of thorough records can also be an employer’s best defense in a lawsuit.

Very few people actually enjoy the evaluation process, but with some forethought and planning, the experience can be quite useful for both the employer and employee. Evaluations represent the opportunity to help employees grow in their jobs and reward and recognize those who are excelling. Done correctly, evaluations lead to higher productivity and can also help keep companies out of legal trouble by providing a strong defense if a disgruntled employee decides to sue. When done poorly, they are essentially a roadmap to litigation.

Publication date: 10/18/2010