Performance Review: What It Means for Employers

What it means in practice

A performance review, also called a performance appraisal or evaluation, compares what an employee actually did over a set period with the standards for the job. The review is a written statement of the employer's reasons, and it is the first document people look at when an employee challenges a raise, a promotion, a demotion or a firing. Most private employment in the United States is at-will, so a review is usually not required by law, but a review you do conduct becomes part of the record.

What the federal government says a review is. The federal civil service offers the clearest regulatory definition. The Office of Personnel Management (OPM) rules describe performance management as "the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of agency mission and goals," and list the purposes: communicating goals, identifying accountability, addressing developmental needs, assessing and improving performance, recognizing and rewarding accomplishments, and using appraisal results as a basis for personnel actions (5 CFR 430.102). Private employers are not bound by this regulation.

How federal agencies structure it. As a model, not a requirement for private employers: the OPM rules call for an appraisal period that is generally 12 months, a written or otherwise recorded performance plan given to employees at the start of the period (normally within 30 days) and at least one progress review during the period (5 CFR 430.206 and 430.207). A rating of record must be based "only on the evaluation of actual job performance for the designated appraisal period," and an agency must not issue a rating that assumes a level of performance without an actual evaluation (5 CFR 430.208).

Reviews and discrimination law. The EEOC states that it is illegal to discriminate against an applicant or employee because of race, color, religion, sex (including transgender status, sexual orientation and pregnancy), national origin, age (40 or older), disability or genetic information, and that the law forbids discrimination "in every aspect of employment." Its list of prohibited practices names pay, assignments, promotions, discipline and discharge, the decisions ratings typically feed. Title VII itself makes it unlawful to discriminate with respect to "compensation, terms, conditions, or privileges of employment" because of protected characteristics (42 U.S.C. 2000e-2(a)). A rating lowered because of a protected characteristic is a discrimination problem even if no one is fired.

Neutral practices with unequal results. Discrimination law also reaches a review practice that looks neutral but disadvantages a group. Under Title VII, once a complaining party shows that a particular practice causes a disparate impact, the employer must show the practice is "job related for the position in question and consistent with business necessity" (42 U.S.C. 2000e-2(k)). For age, the ADEA allows differences based on "reasonable factors other than age," and the EEOC regulation says the employer bears the burdens of production and persuasion on that defense. It lists relevant considerations, including how accurately the employer defined and applied the factor, whether supervisors were given guidance or training, and "the extent to which the employer limited supervisors' discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes" (29 CFR 1625.7).

The Uniform Guidelines on Employee Selection Procedures. The EEOC, Department of Labor, Department of Justice and the former Civil Service Commission jointly adopted these guidelines at 29 CFR Part 1607. They apply to "tests and other selection procedures which are used as a basis for any employment decision," and the examples of employment decisions include hiring, promotion, demotion, retention and, where it leads to those decisions, selection for training or transfer (29 CFR 1607.2). A selection procedure is "any measure, combination of measures, or procedure used as a basis for any employment decision," a definition that covers "informal or casual interviews and unscored application forms" (29 CFR 1607.16). A rating used to decide who is promoted or kept in a layoff can therefore be a selection procedure. They do not cover age or disability claims (29 CFR 1607.2).

The four-fifths rule. The guidelines tell users to keep records showing the impact of their procedures by sex and by race and ethnic group, and say a selection rate for any group that is less than four-fifths (80 percent) of the rate for the group with the highest rate "will generally be regarded by the Federal enforcement agencies as evidence of adverse impact" (29 CFR 1607.4). They add that smaller differences can still matter, and that very small numbers may not be statistically meaningful. Where adverse impact appears, the employer should be ready to show that the procedure is valid for the job (29 CFR 1607.3 and 1607.5). Employers with 100 or fewer employees may use simplified yearly records of persons hired, promoted and terminated for each job, applicants, and selection procedures used (29 CFR 1607.15).

Example: checking promotion ratings. The arithmetic below is our own illustration of the 29 CFR 1607.4 test, not a legal conclusion. A company promotes only employees rated "exceeds expectations." Of 100 men, 30 hold that rating, a rate of 30 percent. Of 90 women, 18 do, a rate of 20 percent. Dividing the lower rate by the higher gives 20 divided by 30, or 66.7 percent, which is below 80 percent. Under the guideline that gap would generally be regarded as evidence of adverse impact, and the employer would want to look at how supervisors reached those ratings.

Disability and performance standards. The EEOC's technical assistance on applying performance and conduct standards to employees with disabilities states that performance management systems with "explicit performance expectations, clear performance standards, accurate measures, and reliable performance feedback, and the consistent application of these standards, help to reduce the chances of discriminatory ratings." It also states that an employer may hold an employee with a disability to the same quantitative and qualitative production standards as others in the same job, that lowering a standard is not a reasonable accommodation, and that an accommodation may still be required to help the employee meet the standard. See the Americans with Disabilities Act (ADA) for the broader framework.

What the EEOC says about timing and ratings. The same guidance says an employer should evaluate an employee with a disability the same way it evaluates anyone else. If an employee first reveals a disability after receiving a lower rating, the employer may keep the rating, because it reflects performance regardless of the role disability played. The ADA does not require employees to ask for accommodation at a particular time, but an employer does not have to rescind discipline or an evaluation warranted by poor performance. Its example of a programmer who missed deadlines, never asked for an accommodation and was terminated after a performance improvement plan concludes the termination was justified if the employer held him to the same standards as other programmers. An employee who must use a different method to perform an essential function must be evaluated accordingly.

Medical questions during a review. The EEOC guidance says the ADA permits an employer to ask for medical information or order an examination when it is job-related and consistent with business necessity, which generally means a reasonable belief, based on objective evidence, that the employee cannot perform an essential function or poses a direct threat because of a medical condition. It adds that an employer cannot require a medical examination solely because an employee's behavior is annoying, inefficient or otherwise unacceptable.

Retaliation in reviews. Federal EEO laws prohibit punishing applicants or employees for asserting their rights, including filing a charge, being a witness, communicating with a manager about discrimination, requesting an accommodation, or asking about pay to uncover discriminatory wages. The EEOC says that, depending on the facts, it can be retaliation if an employer acts because of that activity to "reprimand the employee or give a performance evaluation that is lower than it should be," or increase scrutiny. The EEOC also says protected activity does not shield an employee from discipline motivated by non-retaliatory, non-discriminatory reasons.

Investigatory meetings and the NLRB. The National Labor Relations Board explains that Section 7 of the National Labor Relations Act protects an employee's right, on request, to have a representative present at an interview the employee reasonably believes could lead to discipline (known as Weingarten rights). According to the NLRB page, under current Board law only union-represented employees have this right, though the General Counsel has asked the Board to extend it to all employees; check the page for the current rule. A meeting counts as investigatory when a manager questions the employee as part of an investigation of performance or work conduct and the employee reasonably believes discipline could follow. The NLRB lists meetings that generally do not qualify, including instructional meetings, policy announcements, meetings where the employee is told in advance that no discipline will result, and meetings that only announce a decision already made. Employers are not required to tell employees of the right.

Where states differ. States add their own rules about review documents. As one labeled example, the California Labor Commissioner's Office page on personnel files states that current and former employees, or a representative, have the right to inspect and receive a copy of the personnel files and records that relate to the employee's performance or to any grievance concerning the employee (Labor Code section 1198.5). Inspection must be allowed at reasonable times, not later than 30 calendar days after a written request. Employers must keep personnel records for at least three years after termination, and the page lists a $750 penalty for failing to permit inspection or copying in time. Check your own state labor department.

Recordkeeping. EEOC regulations require employers to preserve any personnel or employment record made or kept, including records about promotion, demotion, transfer, layoff, termination and rates of pay, for one year from the date of the record or the personnel action, whichever is later. For an involuntarily terminated employee, records must be kept for one year from termination. If a charge has been filed under Title VII, the ADA or GINA, all relevant personnel records must be preserved until final disposition, and the relevant records can include those of other employees holding similar positions (29 CFR 1602.14). The EEOC adds that, under ADEA requirements, payroll records must be kept for three years. Review forms, rating criteria and promotion decisions are personnel records. Check state law for longer periods.

Time limits for challenges. The EEOC says a charge must generally be filed within 180 calendar days of the discriminatory act, extended to 300 days where a state or local agency enforces a law prohibiting discrimination on the same basis. If more than one event occurred, the deadline generally applies to each event separately.

Questions employers ask. Are reviews required? Not for private employers by federal law; federal agencies follow OPM rules, and your own handbook or contract may promise them (see employee handbook). Can a manager hold a disabled employee to the same standard? Yes, with accommodation where needed to meet it (EEOC). Do we need to offer a union representative? Only if the Weingarten conditions apply (NLRB). How long should reviews be kept? At least the federal minimum above; see offboarding for records at separation.

Why it matters and common mistakes

How Remindax helps

Related terms

See all terms in Performance & Talent Management or browse the full HR Glossary.