An annual or quarterly performance appraisal can be a useful tool for both employers and employees. Done well, appraisals provide a way for managers to give meaningful feedback to employees to improve their performance. However, when performance appraisals aren't done correctly, they can create serious legal problems for employers in addition to damaging workplace morale.

Performance Appraisals as Evidence

Unfortunately, many employee-employer relationships end up being punctuated not by a hyphen, but by an attorney. When employees feel that they are mistreated in the workplace or feel that they were wrongfully terminated, they may turn to an attorney or file a complaint with a government agency. As you fill in your employee evaluations, keep this in mind. An evaluation that clearly explains the employee's unacceptable performance will bolster your case while an incomplete, inaccurate or unfair document could hurt you.

Discrimination

Performance appraisals frequently come into play when employees come after employers for discrimination. Discrimination laws are relatively broad and essentially place everyone into a protected class. Under federal law, it's illegal to discriminate against a worker on the basis of age (over 40), disability, race, nationality, gender, religion or pregnancy status. Many states add additional categories to this list, too.

Inconsistency

Inconsistency comes into play when you design your evaluations. If you use different forms for every employee, you also leave yourself open to discrimination claims. Instead, consider using the same form and the same standards, if not the same goals, for every employee that occupies the same position.

Inappropriate Feedback

Good performance appraisals focus on measurable aspects of a worker's performance at his job. For instance, saying that a salesperson only hit 75 percent of a quarterly sales quota is a measurable fact. Saying that he's "not very good" might be true, but appears subjective. Saying that he is "an angry person" is a personal judgment, while stating that "he swore at three clients on Feb. 6" refers specifically to on-the-job behavior. Giving feedback that focuses on measurable facts and actual behaviors helps to keep the evaluation more professional and avoid the appearance of personal bias. This will help it stand up in court, if necessary.

Over-Rating

One of the biggest legal problems with evaluations comes up when you are too kind to an employee. Some managers choose to avoid having an uncomfortable meeting by giving relatively good marks to underperforming employees. However, if you eventually choose to fire that worker because he's bad at his job, he'll be able to use the evaluation against you in court. The employee can use the firing and the evaluation together in an attempt to claim discrimination. In essence, his argument is that, since he's so good at his job – based on his evaluation – he must have been fired due to discrimination.

Retaliation

Once an employee has made a claim against you, assessing her performance becomes very dangerous legally. Just about any employee claim – such as an accusation of discrimination or harassment or filing a worker's compensation claim or a request for family and medical leave – gives that employee a special protected status. If you give that employee a bad review, a court could view it as retaliation for her claim instead of as an honest assessment of her performance. While actually retaliating is illegal, simply telling the truth about a problem employee isn't, but you may have to defend yourself, anyways.