Unit IV Case Study: Legal Case Review

Performance Management Introduction

Performance management is the process of ensuring that organizational, departmental, and individual employee goals are met in a consistent and efficient manner. Organizations emphasizing performance management philosophies strategically align resources (both tangible and human), and information systems in order to complete critical goals and objectives. Employee development, efficiency, both in terms of systems and institutional processes, as well as aligning enterprise culture with the overall organizational mission and value statements are all critical components of any successful performance management system. Because performance management appraisal systems are oftentimes directly linked to employee compensation packages, internal promotions, and termination decisions, these systems are frequently subject to legal and internal H.R. scrutiny (Malos, 1998).

Legal Case Study Summary

The primary objective of performance appraisal systems in modern business organizations is to fairly and accurately assess all employees on equal grounds. As such, most legal cases relating to this topic involve systemic breakdowns in the process, resulting in perceived unfair terminations and/or equal opportunity employment issues. Guz v. Bechtel National Inc. is an interesting example of such a case. Guz, upon being downsized as his work duties were suddenly transferred to a different department, alleged that because his organization acted immediately and terminated him without following the typical performance appraisal protocol in place by gradually escalating him on to performance objectives with a mentoring program or improvement plan, violated an implied contract between the employer and employee, thus resulting in wrongful termination (Stanford, 2000). While Guz did not ultimately win his suit as the duties were proven to be transferred due to business need and not because of Guz’s specific performance, the judgment included a fair and clear warning to employers that performance appraisals should be universally applied, lest they be subject to the type of scrutiny presented in this case (Stanford, 2000).

Legal & Ethical Issues Relating to the Case

While the case being referenced specifically relates to an employee alleging that his position and duties were eliminated unfairly due to age discrimination, the case as a whole addresses the larger issue of implied contract and performance appraisal anomalies. Guz was operating under the assumption that if his performance failed to achieve organizational benchmarks set out in his performance management plan, he would be informed of the specific reasons why he had failed to achieve said goals, and be given an opportunity to take guided, corrective action (Stanford, 2000). Instead, his employment contract was terminated suddenly when the organization determined that Guz’s department as a whole required restructuring.

The primary issue at play in Guz’s case was that it was ultimately determined that Guz’s contract was at will, rather than implied, granting the employer considerably more latitude in determining when and how to end the contract (Stanford, 2000). However, the warnings issued in the judgment reiterated clearly the ways in which, and reasons why, performance appraisals should remain universal in nature in order to avoid perceived unfair terminations, hirings, promotions, and compensation adjustments, or lack thereof. The judgment indicated that performance evaluations should ideally strive to apply to and address only specific functions of the job being evaluated, be evaluated by an objective observer with a specific working knowledge of the job and the employees performing it, and be applied indiscriminately. Furthermore, expectations should be clearly communicated and followed through on periodically on a predetermined basis.

References

Malos, S. (1998). Current legal issues in performance appraisal. Retrieved from http://tamu.edu/faculty/payne/PA/Malos%201998.pdf

Stanford Law School: Robert Crown Law Library (2000). Guz v. Bechtel Nationa, Inc. Retrieved from http://scocal.stanford.edu/opinion/guz-v-bechtel-national-inc-31952