Are Annual Performance Reviews Mandatory by Law?

by Debbie A. Duran; Updated September 26, 2017
Performance reviews can be an effective tool for companies and employees.

Performance reviews, or employee evaluations, measure workers' job performance. No law requires companies to conduct job reviews, but businesses that do may have a better understanding of their employees. The information gained from performance reviews can be used to determine raises, succession plans and employee-development strategies.

Considerations

Most employers create policies and procedures that will help their organizations, even if such policies aren't required to by law. The decision to require performances evaluations may emerge from a sense of ethics, efforts to help boost profits, or the desire to prevent lawsuits or other situations that can negativity affect the organization.

Having a performance evaluation system in place can serve as a competitive advantage in an organization because periodic evaluation of employees' work can determine if it supports the organization's goals. Employers are better able to make promotional or compensation decisions with the results from the reviews.

Productivity

Employees feel optimistic if they are recognized and rewarded for good work. Employee reviews helps the organization to identify good performers as well as those who need development. Reviews can be used as a tool to attract qualified candidates during recruitment.

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Equality

While federal laws don't address employee reviews, other laws that ensure that all employees are given an equal employment opportunity. The laws reinforces that actions on wages, disciplines or terminations, are treated in a non-discriminatory way. Without consistent documentation of employees' progress or behaviors, it would be virtually impossible to defend against an employee's claim of discrimination.

Legal Defense

Employees can't file a lawsuit for not having an employee review done, but an employee can sue for issues such as unlawful termination and wages. Employee evaluation is a positive tool for both employers and employees because it can prove that an employee was either unfairly treated in wage, promotion or termination issues, or it can vindicate an employer from a wrongful claim from an employee.

In the case of Slattery v. Swiss Reinsurance America Corp, May 3, 2001, the employee accused the employer of discriminatory termination. The employer had to prove the termination was legitimate and nondiscriminatory, and this was indicated by well-documented performance reviews. The documents indicated that the employee's performance had declined over time and that the employer had taken steps to help the employee before termination. In this situation, the employee review helped the employer justify the termination.

About the Author

Debbie Duran is a human resources professional specializing in recruitment, cultural diversity and organization leadership analysis. She writes for GTJ HR Consulting and is also an adjunct instructor at Colorado Technical University. Duran holds a Bachelor of Arts in organizational leadership from Fordham University as well as a Master of Business Administration in human resources management from Colorado Technical University.

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