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THE BASICS. No federal law requires your company to conduct regular employee performance reviews, but here are two important legal reasons why you should:

First, periodic and competent reviews reduce the likelihood that a fired worker will claim unfair treatment. Appraisals alert employees to what you expect of them, where they excel and how they can improve. Second, the appraisals are your documented proof of poor performance that will help you justify your employment decisions.

Title VII protections apply to performance reviews, so it's illegal to use race, color, religion, gender or national origin as the basis for decisions on hiring, firing, promotions, pay raises, benefits, work assignments, leaves of absence or just about any other aspect of employment.

WHAT'S NEW? More employers are retooling their traditional once-a-year performance appraisal systems in favor of more focused, shorter-term goal-setting sessions with employees. The attraction of more frequent checkups? You can reset priorities and avert potential problems quickly.

A Conference Board survey found that 90 of 100 HR managers polled said they would "totally revise" or even eliminate their current appraisal process. The problem: While many companies have modernized other HR functions, such as payroll and administration, they've ignored reviews.

Also, the once-popular trend of ranking the worst performers each review period appears to be ending. Goodyear is the latest company to say legal concerns have forced it to dump the practice, which singles out the bottom 10 percent of the work force. In Goodyear's case, older workers filed an age discrimination lawsuit, claiming they received most of the low marks.

HOW TO COMPLY. Develop a clear policy that explains your evaluation system to employees and managers, detailing how to track performance, both good and bad. Don't paint yourself into a corner by promising reviews on a certain schedule (quarterly, annually) or linking salary increases to the review.

Have managers keep a regular log on each employee's work quality and disciplinary actions throughout the year. This will help you evaluate the employee's complete work, not just the last thing you remember. It will also help in court by clearly demonstrating a history of performance problems.

Key point: Employee logs can serve as evidence in court. That's why log entries should include only objective, performance-based notes.

Resources: Reviews

The Manager's Guide to Effective, Legal Performance Reviews, published by the National Institute of Business Management, offers in-depth guidance on honing your employee appraisals with legal do's and don'ts in mind. To order, call (800) 543-2055 or go to www.nibm.net/effective, click on "Books," then "Human Resources."

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