Employers frequently design performance improvement plans (PIPs) for underperforming employees. The idea is to get them up to standard so they can keep their jobs.
But the way managers choose who to place on PIPs can have serious consequences. Without oversight from HR, some managers may overlook the of some subordinates while using draconian improvement plans to push equally underachieving workers out the door. If that unfair strategy harms members of a protected class while letting others skate along, rest assured that a lawsuit will soon follow.
Here’s how to make sure your PIP system is fair—and legal: Compare a list of employees on improvement plans with those who got similarly poor evaluations, yet didn’t make the PIP list. Then see if race, sex, disability or any other protected characteristic shows up more frequently on either list. If that’s the case, revamp the PIP process to ensure that everyone with similar performance issues is placed on a plan.
Recent case: Roberta Tse, who worked for UBS Financial Services, consistently ranked in the middle of her peer group at evaluation time.
When an economic downturn hit, her performance sank. That’s when the company placed Tse on a PIP. The plan required her to raise the assets she managed by $1 million per month for six months. She couldn’t do it and UBS discharged her. She sued for discrimination.
A jury ruled in her favor, largely because Tse showed that men who performed as poorly or worse than she did were never placed on PIPs. The court overseeing the case agreed and said the company owed Tse about $400,000, including $300,000 in punitive damages. (Tse v. UBS Financial Services, No. 03-Civ-6234, SD NY, 2008)
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