There are six important concepts that often come into play in the case of litigation related to the implementation of a performance management system: employment at will, negligence, defamation, misrepresentation, adverse impact, and illegal discrimination.
• Employment at will. In employment at will, the employer or employee can end the employment relationship at any time. This type of employment relationship dives employers considerable latitude in determining whether, when, and how to measure and reward performance. Thus, an employer could potentially end the employment relationship without documenting any performance problems. There are two exceptions regarding an organization’s ability to terminate an employee under these circumstances. First, there may be an implied contract derived from conversations with others in the organization or from information found in the company’ s documentation (e.g., employee handbook) indicating that employees would be terminated for just cause only. Second, decisions about terminating an employee should consider a potential violation of public policy. A 1995 case decided by the Supreme Court of Hawaii illustrates the implied contract exception to the employment at will doctrine. Harry Michael Mathewson, a pilot for Aloha Airlines, was fired just two weeks before a one-year at-will probationary period would have expired. The termination was based on supposed poor peer performance ratings. It turned out, however, that Mathewson had been blacklisted by the pilots’ union for having worked as a scab for another airline during a strike, and he received negative reviews based on that fact and not on his performance at Aloha. The airline violated an implied contract to provide fair and unbiased evaluations, which was based in part on the company’s employee handbook. This case illustrates the benefits of basing termination decisions on information from a good performance management system, even under employment at will.