Do Not Replace an Employee Based on Performance with One Rated as Worse


That was the rather obvious lesson learned by an employer in a recent sex discrimination case. But there are more subtle lessons here regarding an employer’s ability to establish performance expectations and documentation.

In Sempowich v. Tactile Systems Technology, Inc., an award-winning female sales manager with strong annual evaluations was reassigned to another position with fewer opportunities and management responsibilities, only weeks after she was given yet another sales award, a discretionary equity grant, and a salary increase. The asserted reason for her transfer was her failure to meet the company’s performance goals over the course of several years. But she was replaced by a male who consistently received lower annual performance ratings. She sued for sex discrimination. The trial court dismissed her lawsuit, but the Fourth Circuit reversed the ruling, finding that there was, in fact, evidence to support her claims of sex discrimination.

While an employer is free to set its performance expectations and to determine whether an employee is meeting them, in this case the Fourth Circuit questioned whether the stated expectations were legitimate and genuine. It noted that if an employer truly believes an employee is performing poorly on critical metrics, it is unlikely that it would rate her highly, or give her awards, a discretionary equity grant and a salary increase. And while the employer argued that these were for her prior performance (and inconsistently argued that her performance issues existed for several years), the court observed that some of these rewards occurred only weeks before she was reassigned, and that there was no indication of poor performance in any evaluation. The Fourth Circuit also found that “a jury might well conclude it unlikely that an employer who reassigned an employee solely because it believed that she performed poorly would replace her with an employee whose performance it consistently rated as worse.” (Emphasis in original).

It is important for employers to recognize that, while they can certainly set legitimate performance standards, they need to ensure that their actions and the documentation accurately reflect whether the employee is meeting such standards. And certainly, if removing an employee from a position because of poor performance, the replacement’s performance should not be reflected in documentation as being worse.