It is very common for human resources to encourage management to write honest performance reviews, and/or to utilize a performance plan, before terminating a long-term employee based on poor performance. We encourage management to utilize these tools primarily because it is the right thing to do from a values perspective – an employee should be given adequate notice of deficiencies and an opportunity to correct the deficiencies before termination becomes necessary.
It is also helpful to tell management, however, that there are good economic reasons to utilize performance reviews and performance plans. In a wrongful termination case, if a judge or jury finds there was unlawful discrimination, an employer’s liability can often reach $1 million. An employer’s chances of winning a wrongful termination case – and avoiding the $1 million liability – go up dramatically if it can show the employee was "warned" about poor performance on a performance review, or through a performance plan. Under that circumstance, a jury will be far more likely to think the employer was "fair," and therefore, that it did not wrongfully terminate the employee.
So, if you are encouraging a manager to write an honest review, or to consider a performance plan, and the manager argues that the business simply cannot afford to keep the employee on the payroll while it undertakes those actions, ask the manager which cost is higher – the cost of keeping the employee on the payroll while you go through performance counseling, or the cost of losing a lawsuit because you were not "fair" to the employee.
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