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EVALUATIONS Employee performance reviews and pretext: a hard lesson from the Tenth Circuit

Oklahoma Employment Law Letter - April 1, 2010

by Paul Ross

As veterans of employment litigation can tell you, em­ployment discrimination claims are rarely supported by di­rect evidence of discriminatory decision making. In the over­whelming majority of cases, employees support their entire case with circumstantial evidence. In short, they attempt to cast as much doubt as possible on the reasons offered by the employer for its employment decision, leaving the jury to con­clude that there must be some other, more sinister reason for the decision — illegal discrimination. In essence, they ask the jury to conclude that the employer’s stated reason for its deci­sion wasn’t the “real” reason but, instead, was pretext to hide illegal discrimination.

Of course, this approach is maddening to employers be­cause it’s a judicial process that essentially calls the employer a liar: “Sure, sure, we know what you say under oath, but we’ll allow the jury to conclude that you’re committing perjury — a federal crime — to cover up discrimination through the em­ployee’s use of indirect evidence; evidence that is subject to in­terpretation and always less than clear.” Welcome to federal court employment litigation.

A recent decision by the Tenth U.S. Circuit Court of Appeals (which covers Oklahoma) provides some important guidance to employers about one of the most common forms — indeed, the original form — of pretext evidence: the annual employee performance review.


The performance appraisal problem
In 2005, Boeing sold its local facility to Spirit Aero­systems. Spirit intended to continue operations at the plant and asked Boeing to recommend which of its for­mer employees should be retained. The employee at the center of this case filed suit against Boeing and Spirit after his former manager recommended that Spirit not hire him.

In defense of his recommendation, the manager tes­tified that the employee, when compared to his cowork­ers, had “limited skills,” performed with “low quality” and “low productivity,” and had “marginal teaming abilities” — all legitimate nondiscriminatory reasons that would support the decision not to retain him.

Lacking any direct evidence of discriminatory intent, the employee contended that his former manager’s ex­planation wasn’t the “true” reason for the decision, but a pretext for age discrimination. To support his claim, he offered his most recent performance appraisal.

His review reflected that he “met all expectations” in every category, including technical skills, knowledge, productivity, quality, and “people working together.” The comments section included a statement that he “performed well” and instructed him to “keep up the good work.” The employee argued that the evaluation expressly contradicted the reasons offered by his former manager and that a jury should be free to conclude that his age was the true reason for the decision.

The Tenth Circuit agreed and ordered a jury trial on the issue. The court held that the disparity between the employee’s written evaluation and the justifications later given by Boeing was sufficient, on its own, to require a jury determination on pretext. Thus, even without any affirmative evidence of age discrimination, a jury will be allowed, should it so choose, to conclude that Boeing discriminated against the employee because of his age. Woods v. The Boeing Company, 2009 WL 4609678 (10th Cir., 2009).

Takeaway
Although this case breaks no new legal ground, it’s a reminder of employee documentation as critical circum­stantial evidence. In that regard, it highlights two impor­tant lessons for employers. First, annual employee evalu­ations are of no assistance unless they are authored with complete honesty. In fact, as this case shows, they can be of significant detriment. Managers must be trained to carefully and thoughtfully review their employees and offer complete and honest feedback regarding per­formance. They must avoid the convenience of blanket “meets expectations” reviews and the temptation to avoid confrontation with underperforming employees. Otherwise, it’s better not to do evaluations at all.

Second, HR professionals and managers alike must consider performance appraisals when contemplating disciplinary measures or other significant employment decisions. Before taking action, evaluate key documents (e.g., performance reviews) to ensure they don’t contra­dict the action or support a “pretext” argument by the employee. If an evaluation reveals an issue, consider alternatives that will aid in building an appropriate record of the performance problems at issue.

Employer decision making will continue to face exhausting scrutiny under the microscope of “pretext” analysis. However, this case is a shining example of pre­ventable pretext problems and should serve as a strong reminder to employers to properly manage your annual evaluation programs.