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Demote an Employee After a Positive Performance Review? Federal Appeals Court Says Not So Fast

    Client Alerts
  • December 10, 2021

Although it seems counterintuitive, we regularly run across situations where clients want to fire or demote an employee who recently received a promotion, stellar performance review, or some other kind of reward for good work. Often, the client tells us that the reviews do not accurately reflect the employee’s actual performance level. A new decision from the Fourth Circuit Court of Appeals (which includes North Carolina, South Carolina, and Virginia) reminds employers of the perils faced by ignoring their own personnel documentation.

In Sempowich v. Tactile Systems Technology, Inc., the plaintiff was a female regional salesperson who was replaced by a somewhat younger male employee. She was instead offered a marketing position that had limited earning potential. She refused the move and filed suit alleging sex and age discrimination as well as retaliation. The district court dismissed the claim on summary judgment, concluding that the employer subjectively believed that the plaintiff’s performance lagged behind its expectations.

On appeal, the Fourth Circuit reversed this decision, remanding the claim for jury trial. In its decision, the court relied on the employer’s own recent assessments of the plaintiff’s performance. This documentation included an award for sustained excellence made three weeks before the reassignment, a promised salary increase, a grant of equity in the company, and high ratings on a recent performance evaluation. The Fourth Circuit noted that the employee who replaced the plaintiff scored lower on the most recent evaluation. This evidence raised questions of fact as to whether the employer actually believed that the plaintiff was a poor performer.

Human resources professionals need to resist business unit managers who want to take disciplinary action against employees that is directly contradictory to their own recent written assessments of those individuals. Unless the company establishes and documents an adequate basis for the action taken, judges and juries will typically give more credibility to personnel records than to the managers’ explanations of why those records do not accurately reflect the employee’s actual performance issues.