Stacked Employee Ratings: Emerging Legal Pros and Cons

In HR circles, there has been a growing discussion of “stacked employee ratings” by which management determines pre-set percentages of employees to be rated in the categories of “excellent,” “good,” “fair” and “poor,” or similar such rankings. It is somewhat like the beloved grading curve in school. Like the grading curve, stacked employee ratings are designed to force specificity in evaluations and avoid “grade inflation.”

It’s a hot topic and one where considerations of effectiveness, employee morale, and fairness bear consideration. Microsoft recently ended its “hated” stacked employee rating system. But other employers continue to use and improve this system at least on a pilot basis. Stacked employee rating HR software programs are beginning to appear on the market.

From a legal perspective, a well designed stacked rating system could help prove up legitimate, non-discriminatory bases for employee discipline better than a more easily “fudged” traditional performance review. Some legal considerations for Minnesota employers considering stacked employee ratings include:

  • Maintaining employee privacy rights by following clear segregation of personnel records and separate supervisor files as allowed by Minnesota law.
  • Determining what to do with the “bottom” rankers: It is potentially risky to pursue discipline for just some of the “bottom” rankers, but not others, without raising concerns about protected category discrimination.
  • Weighing the possibility of disparate impact discrimination when a rating system codifies employee placement in categories and thereby influences the terms and conditions of employment, such as raises or promotions.

Takeaways: These concerns are not to say that stacked employee ratings are illegal or even legally inadvisable. But “nothing is new under the sun,” and the traditional legal pros and cons used to analyze all employment policies need to be weighed and reviewed before embarking on a stacked employee rating system. Right now, I would give the concept a C+/B-.