With employers relying on contract staff there’s a need to reconsider performance appraisals. And don’t forget about new employees
Performance appraisals put staff on the road to success. So why are so many people excluded from the process?
Adding contract staff and new and probationary employees to performance appraisal systems helps focus work and effort, but these workers are too often left out of the process.
Implementing a successful performance appraisal program is not an easy task. The process, even in its simplest form, seems to confound management. Things become even murkier when the idiosyncrasies of non-mainstream employees are injected into the process. Most organizations use a vanilla program for all employees, with little consideration given to whether the program should be modified for different groups of employees.
Contract employees work here too
Organizations make use of any number of contract staff and independent contractors. While there is a significant difference between the employer-worker relationships involved, for the purpose of examining performance appraisals the term contract staff can be applied to both groups.
So, should contract staff be appraised in the same manner as full-time employees?
Contract employees often have their contracts renewed year after year and both in law and perception become full-time employees. If the employer’s attitude is to continue such employment without a regimented and formalized appraisal process because it feels it can terminate the contract at any time, then it makes itself vulnerable to a number of problems:
•full-time employees could feel unfairly treated since they are subject to performance appraisal;
•a missed opportunity to focus on organizational and departmental goals and strategies;
•a missed opportunity to identify and remedy developmental issues; and
•the benefit of two-way communication between managers and employees that occurs in the appraisal process is foregone.
Perception of inequity by full-time employees: Employers should be aware of the perceived inequity of evaluating regular employees while not evaluating contract staff.
Most employees want to have their performance evaluated. As long as individuals believe a program is fair and without bias, their penchant for being evaluated continues. But as soon as they perceive that a program is biased, it will lose its credibility and as a result much of its value.
If contract employees work in close proximity to regular employees, and do appreciably the same work, and are not subject to an evaluation process, then regular employees will be disillusioned with the appraisal program.
Focus on organizational goals and strategies: One of the merits of a well-designed performance appraisal program is that it leads the participants to focus on the goals and strategies of both the organization and the employees’ department. It provides for an alignment of employees’ objectives with those of the institution and its relevant parts.
If contract staff do not participate in an appraisal program, then this opportunity to align goals is missed. The person will focus on what she perceives she was hired to accomplish and will have a tendency to take those actions that speak exclusively to her own purpose.
Some might argue that this situation is exactly what is wanted. Contract workers are hired to fulfill specific tasks and that is all they should focus on. This may be a valid argument in those cases where the contract employee is recruited for a short-term period to work on a specific project. But in many cases using the “contract” label is only a convenience to avoid issues and, in effect, the person is an employee. Therefore by not including contract staff in a performance appraisal program the organization loses the opportunity to have a segment of the workforce focus on organizational objectives and strategies.
Development opportunities: Whether the employment of contract employees is planned to be a short- or long-term arrangement, having some process to access development needs is most valuable.
Undoubtedly there are detractors who would argue that development of contract employees is a waste of the organization’s resources. By the nature of the person’s employment status, it is evident that the organization is not planning to retain the person for a long time. That rationale may be fine, but contract employees are often retained for lengthy periods or alternatively are transferred to full-time status. Therefore if opportunities for identifying development needs are ignored, the opportunity to move toward improved performance is missed.
Communications: One of the values of a performance appraisal program is that it provides a forum for employees and managers to communicate.
If the performance appraisal process is the only time the boss and her subordinates communicate, there is a serious problem. Communication should be a continual and major part of any manager’s activities.
Unfortunately, communications to many managers is one-way, and the opportunity for employees to constructively provide input as to their performance, their aspirations and their development needs only comes during the appraisal process. Employees often see this process providing a sanctuary for the expression of opinions or individual points of view.
The absence of an appraisal program for contract workers may remove a valuable conduit of information for the manager and the organization. Even though the contract worker may only be connected to an organization for a limited period of time, her observations, insights and suggestions may prove to be valuable assets for the organization. All of these may go untapped without an appraisal program providing a platform for communications.
Modifying the process for contract staff
A case has been made as to why this group of individuals should be part of an appraisal program. What remains is defining the type of program under which they should be appraised.
One could argue the design of the program is determined by the work the contract employee is required to perform — is it a unique task not performed by full-time employees or is it a function similar to that of others?
Unique tasks: Where the work is unique, objectives should be set that pertain to the successful completion of the task. These objectives could be related to budget, completion date and quality of product. It is assumed that completion of the work in a given manner and in a timely way is an objective of the organization. Therefore for the person hired to fulfill a specific task, there is no need to introduce other objectives tied to the organization’s strategy.
Regular meetings between the manager responsible and the contract employee should be carried out to ensure the project is on target and on budget. These meetings provide the opportunity for communications between the parties as is the norm in appraisal programs.
Since the worker is hired to accomplish a given task, it is assumed the procuring process has ensured the person is capable of doing the work. Therefore the development aspect of an appraisal system should not be needed and as a result is not appropriate.
Setting up a formal appraisal system should provide the organization with a number of benefits:
•employees can feel reassured that the project is being managed and that company funds are not being carelessly dissipated;
•employees will be motivated to see that their work is completed or taken to the necessary stage to be integrated with the contract employee’s project; and
•the constant monitoring built into this appraisal process will enable the organization to determine at an earlier stage as to whether a project is in difficulty. In cases where a project is discovered to be in difficulty, corrective action can be taken.
When work is not unique: In those cases where contract staff do the same work as regular full-time employees, they should be appraised in the same manner.
Whether an organization wants to recognize the fact or not, long-term contract staff are, in effect, employees. To maintain the credibility of the appraisal system they should be subject to it the same as regular employees.
All the facets of the regular performance program should apply to them. In the event they fail to achieve their objectives, they should be subject to the same outcomes as full-time employees whether those outcomes are additional mentoring, training or change in responsibilities and duties.
Add new employees and reap the benefits
Should a new employee be subject to the same appraisal program as longer-term employees?
Assuming the appraisal system is based on the achievement of agreed objectives, a period of time should pass before the new employee is required to agree to objectives.
The rationale behind this approach stems from the fact that, typically, the new employee is subject to a major learning curve. She needs to establish the parameters of her new position including:
•the bona fide scope as opposed to the job description;
•its authority; and
•the resources available to the position.
Too frequently organizations set objectives with new employees before such orientation is completed. The result is that either formally, or more likely informally, employers implement the technique of being more lenient in their ratings of such employees. Aside from other problems, this likely does not set the proper precedent for future evaluations.
One solution to this is to use a trial appraisal form. Many of the elements of a regular appraisal program are included but there is an understanding that the results won’t be used to the detriment of the employee. The basic concept of using the performance appraisal program as a communications and development tool is integrated into this initial program. The concept also includes the exercise of negotiating objectives, but the objectives are designed to have ranges of acceptable achievement.
An impediment to this approach occurs if the employee is subject to a bonus based on the outcome of the performance evaluation process. Since there are no bona fide objectives, it is difficult to assign an appropriate reward for performance.
Some organizations workaround such problems by providing a guaranteed or minimum bonus for the first year’s employment. In such cases the bonus is linked to achievement of results and the minimum or guarantee occurs only when objectives are not achieved.
Another alternative is to provide a guaranteed bonus the first year of employment, but not link it to the results of the appraisal in any way. This removes an employee’s feeling that the objectives were set unfairly as a result of her ignorance of the various components of the position. It allows for the trial appraisal to be used as a developmental tool and provides for positive communications between the employee and the manager.
Assume a new employee has successfully completed a probationary period or is in an organization that does not have a formal probationary period. The issue that needs addressing is how to orient the person to successfully participate in the performance appraisal process.
The easiest approach is to explain the organization’s program and insert the new person into the process. Although this might be the easiest way to proceed, it’s probably not the most effective solution in the short or long term. It’s also not the best approach for the new employee, co-workers and the organization.
Since the new person is faced with a number of uncertainties, placing her into the normal performance appraisal process early in her employment can create apprehension and may lead to diminished performance. It may lead to a loss of credibility for both the boss and the organization if the new employee feels she has been taken advantage of in the setting of objectives.
The loss of credibility is likely to extend to the appraisal program and will continue long after the appraisal period has ended.
A more productive process is to have a honeymoon period during which the employee’s performance is charted against a hypothetical set of objectives. These objectives can be an amalgam of objectives — those of the previous incumbent, peers doing similar work and the desired objectives for the position in the future.
During the time the employee was being oriented to the appraisal process, these objectives would be reviewed with her and compared with her achievements on a regularly scheduled basis.
This approach provides an excellent communications opportunity for the boss and the new employee. It gives the boss the opportunity to explain how the objectives and the performance relate to the goals and objectives of the organization in general and the department in particular.
In this format the employee would have the opportunity to gain clarification of issues she might otherwise be reluctant to raise.
Another advantage of this approach is its ability to identify areas that need improvement early on in the new recruit’s employment. Improvement might be achieved by directing the focus of the employee, pointing out where mentoring is needed and identifying areas that require additional training.
Whatever the approach, it provides the opportunity to get improved performance earlier in the employee’s career and saves the employee from being branded as incompetent in one or more areas of performance.
What about probationary employees?
When considering the issue of performance appraisal for probationary employees a couple of questions need to be addressed:
•What is the purpose of the probationary period?
•What criteria should be used for appraising employees during such a period?
Most employers would say the probationary period filters out people who do not qualify for positions for which they are hired or whose behaviour does not meet company standards. But in many cases that filter is a subjective one without any substantive basis.
When people are hired to primarily perform tasks, this approach, although flawed, is reasonably effective. But with so many workers now falling into the category of knowledge workers, this approach is no longer satisfactory.
The outcome of the work of the knowledge worker is longer-term in nature and the results much more nebulous than the task-oriented employee who dominated the workplace in the past. Therefore short-term subjective evaluations of quality of work are prone to erroneous conclusions and often do not treat probationary employees fairly.
This state of affairs becomes more complicated as a result of the informality prevailing in the workplace. In organizations where flex time is in place, it’s difficult to make judgments on punctuality and time worked. Since casual dress pervades almost all working environments, a case for professional presence is almost impossible to formulate.
Therefore an argument can be made that either the probationary period should be eliminated or it should be extended to allow for the full impact of the new employee to be felt. Or the probationary period could be confined to corporate policies and shoe-horned into the new environment. Whatever approach is taken, it should be made clear to the employee from the beginning what the criteria for appraisal will be during the period.
A worker starting a new job has many tasks to learn. Without a clear description of what is expected, the probationary employee could be concentrating on the wrong issues. The appraisal criteria should be spelled out during the recruiting process. This allows the employee to focus on what her new manager feels is most important. She should then be judged on that set of criteria.
In cases where the criteria for evaluation is not spelled out, personality conflicts are more likely to be dominant in the decision-making process. The incidence of this situation is evident when a department is found to consistently reject probationary employees.
Such a high rejection rate of new employees can be costly for the organization both in dollars spent on recruitment, as well as reputation in the marketplace.
There should be a formalized appraisal process put in place for probationary employees at the time they start working for the organization.
The criteria as to what are deemed successful performance needs should be described and codified at the time the hiring search is initiated. By taking this tact, the instance of personalities is removed from the situation and the recruiter has a better basis with which to conduct the search.
Such an approach means each candidate has to tackle the same hurdles. Managers who are prone to judge success and thus future employment based on personality can be challenged. It provides all new employees with a more level playing field.
Fred Pamenter is managing partner with Pamenter, Pamenter, Brezer and Deganis Limited, a Toronto-based HR consulting and executive search firm. He can be contacted at (416) 620-5980 or [email protected].
Performance documentation and the legal question of contract status
There have been a number of instances where contracts have not been formally renewed, yet the contractor continues employment with both parties carrying on the charade that the contractor is not an employee.
This scenario represents an interesting dilemma. If an organization evaluates contract staff on the same basis as regular employees, it would seem that it was substantiating the premise that the contractor is actually an employee.
On the other hand, if the employer does not have an evaluation program in place, it is jeopardizing its ability to terminate the long-term contractor on the basis of performance. The courts would likely rule that, although the individual was called a contractor by the employer, the person was in effect an employee and entitled to the same termination benefits as a regular employee.
Stuart Rudner, an employment lawyer at the law firm of Miller Thomson in Toronto, said organizations walk a fine line when subjecting staff they don’t consider to be employees to a performance management process — especially if the relationship is supposed to be that of an independent contractor.
“I would be careful to distinguish between a contract worker, who is clearly an employee (for the duration of the contract), and independent contractors,” said Rudner. “It’s important to realize that imposing a performance management program can have a very profound and unintended impact on the legal relationship.”
That’s because courts will look beyond what the contract states in determining whether the employment relationship was that of an independent contractor or that of an employee. Even the best-drafted contract, written by the best lawyers, stating in the clearest terms that the contractor is not an employee, won’t hold water in court if the facts prove otherwise, he said.
“A performance management program is a good thing and you want to have ongoing reviews of your employee performance and ongoing feedback so they can improve their performance,” said Rudner. “But if you have someone who is really an independent contractor, who you’re not exerting control over and they’re not really a part of the organization, you might want to be very careful in imposing a performance management program.”
That’s not to say employers can’t discuss performance issues with independent contractors — that’s just a straightforward business relationship. But it becomes a bit hazier if it turns to things like the process or the tools being used or any of the indicia of an employment relationship.
“If you go too far you’re going to create an employment relationship,” he said. “You have to ask, ‘Is improved performance worth the risk that they might be found to be an employee?’”
Adding contract staff and new and probationary employees to performance appraisal systems helps focus work and effort, but these workers are too often left out of the process.
Implementing a successful performance appraisal program is not an easy task. The process, even in its simplest form, seems to confound management. Things become even murkier when the idiosyncrasies of non-mainstream employees are injected into the process. Most organizations use a vanilla program for all employees, with little consideration given to whether the program should be modified for different groups of employees.
Contract employees work here too
Organizations make use of any number of contract staff and independent contractors. While there is a significant difference between the employer-worker relationships involved, for the purpose of examining performance appraisals the term contract staff can be applied to both groups.
So, should contract staff be appraised in the same manner as full-time employees?
Contract employees often have their contracts renewed year after year and both in law and perception become full-time employees. If the employer’s attitude is to continue such employment without a regimented and formalized appraisal process because it feels it can terminate the contract at any time, then it makes itself vulnerable to a number of problems:
•full-time employees could feel unfairly treated since they are subject to performance appraisal;
•a missed opportunity to focus on organizational and departmental goals and strategies;
•a missed opportunity to identify and remedy developmental issues; and
•the benefit of two-way communication between managers and employees that occurs in the appraisal process is foregone.
Perception of inequity by full-time employees: Employers should be aware of the perceived inequity of evaluating regular employees while not evaluating contract staff.
Most employees want to have their performance evaluated. As long as individuals believe a program is fair and without bias, their penchant for being evaluated continues. But as soon as they perceive that a program is biased, it will lose its credibility and as a result much of its value.
If contract employees work in close proximity to regular employees, and do appreciably the same work, and are not subject to an evaluation process, then regular employees will be disillusioned with the appraisal program.
Focus on organizational goals and strategies: One of the merits of a well-designed performance appraisal program is that it leads the participants to focus on the goals and strategies of both the organization and the employees’ department. It provides for an alignment of employees’ objectives with those of the institution and its relevant parts.
If contract staff do not participate in an appraisal program, then this opportunity to align goals is missed. The person will focus on what she perceives she was hired to accomplish and will have a tendency to take those actions that speak exclusively to her own purpose.
Some might argue that this situation is exactly what is wanted. Contract workers are hired to fulfill specific tasks and that is all they should focus on. This may be a valid argument in those cases where the contract employee is recruited for a short-term period to work on a specific project. But in many cases using the “contract” label is only a convenience to avoid issues and, in effect, the person is an employee. Therefore by not including contract staff in a performance appraisal program the organization loses the opportunity to have a segment of the workforce focus on organizational objectives and strategies.
Development opportunities: Whether the employment of contract employees is planned to be a short- or long-term arrangement, having some process to access development needs is most valuable.
Undoubtedly there are detractors who would argue that development of contract employees is a waste of the organization’s resources. By the nature of the person’s employment status, it is evident that the organization is not planning to retain the person for a long time. That rationale may be fine, but contract employees are often retained for lengthy periods or alternatively are transferred to full-time status. Therefore if opportunities for identifying development needs are ignored, the opportunity to move toward improved performance is missed.
Communications: One of the values of a performance appraisal program is that it provides a forum for employees and managers to communicate.
If the performance appraisal process is the only time the boss and her subordinates communicate, there is a serious problem. Communication should be a continual and major part of any manager’s activities.
Unfortunately, communications to many managers is one-way, and the opportunity for employees to constructively provide input as to their performance, their aspirations and their development needs only comes during the appraisal process. Employees often see this process providing a sanctuary for the expression of opinions or individual points of view.
The absence of an appraisal program for contract workers may remove a valuable conduit of information for the manager and the organization. Even though the contract worker may only be connected to an organization for a limited period of time, her observations, insights and suggestions may prove to be valuable assets for the organization. All of these may go untapped without an appraisal program providing a platform for communications.
Modifying the process for contract staff
A case has been made as to why this group of individuals should be part of an appraisal program. What remains is defining the type of program under which they should be appraised.
One could argue the design of the program is determined by the work the contract employee is required to perform — is it a unique task not performed by full-time employees or is it a function similar to that of others?
Unique tasks: Where the work is unique, objectives should be set that pertain to the successful completion of the task. These objectives could be related to budget, completion date and quality of product. It is assumed that completion of the work in a given manner and in a timely way is an objective of the organization. Therefore for the person hired to fulfill a specific task, there is no need to introduce other objectives tied to the organization’s strategy.
Regular meetings between the manager responsible and the contract employee should be carried out to ensure the project is on target and on budget. These meetings provide the opportunity for communications between the parties as is the norm in appraisal programs.
Since the worker is hired to accomplish a given task, it is assumed the procuring process has ensured the person is capable of doing the work. Therefore the development aspect of an appraisal system should not be needed and as a result is not appropriate.
Setting up a formal appraisal system should provide the organization with a number of benefits:
•employees can feel reassured that the project is being managed and that company funds are not being carelessly dissipated;
•employees will be motivated to see that their work is completed or taken to the necessary stage to be integrated with the contract employee’s project; and
•the constant monitoring built into this appraisal process will enable the organization to determine at an earlier stage as to whether a project is in difficulty. In cases where a project is discovered to be in difficulty, corrective action can be taken.
When work is not unique: In those cases where contract staff do the same work as regular full-time employees, they should be appraised in the same manner.
Whether an organization wants to recognize the fact or not, long-term contract staff are, in effect, employees. To maintain the credibility of the appraisal system they should be subject to it the same as regular employees.
All the facets of the regular performance program should apply to them. In the event they fail to achieve their objectives, they should be subject to the same outcomes as full-time employees whether those outcomes are additional mentoring, training or change in responsibilities and duties.
Add new employees and reap the benefits
Should a new employee be subject to the same appraisal program as longer-term employees?
Assuming the appraisal system is based on the achievement of agreed objectives, a period of time should pass before the new employee is required to agree to objectives.
The rationale behind this approach stems from the fact that, typically, the new employee is subject to a major learning curve. She needs to establish the parameters of her new position including:
•the bona fide scope as opposed to the job description;
•its authority; and
•the resources available to the position.
Too frequently organizations set objectives with new employees before such orientation is completed. The result is that either formally, or more likely informally, employers implement the technique of being more lenient in their ratings of such employees. Aside from other problems, this likely does not set the proper precedent for future evaluations.
One solution to this is to use a trial appraisal form. Many of the elements of a regular appraisal program are included but there is an understanding that the results won’t be used to the detriment of the employee. The basic concept of using the performance appraisal program as a communications and development tool is integrated into this initial program. The concept also includes the exercise of negotiating objectives, but the objectives are designed to have ranges of acceptable achievement.
An impediment to this approach occurs if the employee is subject to a bonus based on the outcome of the performance evaluation process. Since there are no bona fide objectives, it is difficult to assign an appropriate reward for performance.
Some organizations workaround such problems by providing a guaranteed or minimum bonus for the first year’s employment. In such cases the bonus is linked to achievement of results and the minimum or guarantee occurs only when objectives are not achieved.
Another alternative is to provide a guaranteed bonus the first year of employment, but not link it to the results of the appraisal in any way. This removes an employee’s feeling that the objectives were set unfairly as a result of her ignorance of the various components of the position. It allows for the trial appraisal to be used as a developmental tool and provides for positive communications between the employee and the manager.
Assume a new employee has successfully completed a probationary period or is in an organization that does not have a formal probationary period. The issue that needs addressing is how to orient the person to successfully participate in the performance appraisal process.
The easiest approach is to explain the organization’s program and insert the new person into the process. Although this might be the easiest way to proceed, it’s probably not the most effective solution in the short or long term. It’s also not the best approach for the new employee, co-workers and the organization.
Since the new person is faced with a number of uncertainties, placing her into the normal performance appraisal process early in her employment can create apprehension and may lead to diminished performance. It may lead to a loss of credibility for both the boss and the organization if the new employee feels she has been taken advantage of in the setting of objectives.
The loss of credibility is likely to extend to the appraisal program and will continue long after the appraisal period has ended.
A more productive process is to have a honeymoon period during which the employee’s performance is charted against a hypothetical set of objectives. These objectives can be an amalgam of objectives — those of the previous incumbent, peers doing similar work and the desired objectives for the position in the future.
During the time the employee was being oriented to the appraisal process, these objectives would be reviewed with her and compared with her achievements on a regularly scheduled basis.
This approach provides an excellent communications opportunity for the boss and the new employee. It gives the boss the opportunity to explain how the objectives and the performance relate to the goals and objectives of the organization in general and the department in particular.
In this format the employee would have the opportunity to gain clarification of issues she might otherwise be reluctant to raise.
Another advantage of this approach is its ability to identify areas that need improvement early on in the new recruit’s employment. Improvement might be achieved by directing the focus of the employee, pointing out where mentoring is needed and identifying areas that require additional training.
Whatever the approach, it provides the opportunity to get improved performance earlier in the employee’s career and saves the employee from being branded as incompetent in one or more areas of performance.
What about probationary employees?
When considering the issue of performance appraisal for probationary employees a couple of questions need to be addressed:
•What is the purpose of the probationary period?
•What criteria should be used for appraising employees during such a period?
Most employers would say the probationary period filters out people who do not qualify for positions for which they are hired or whose behaviour does not meet company standards. But in many cases that filter is a subjective one without any substantive basis.
When people are hired to primarily perform tasks, this approach, although flawed, is reasonably effective. But with so many workers now falling into the category of knowledge workers, this approach is no longer satisfactory.
The outcome of the work of the knowledge worker is longer-term in nature and the results much more nebulous than the task-oriented employee who dominated the workplace in the past. Therefore short-term subjective evaluations of quality of work are prone to erroneous conclusions and often do not treat probationary employees fairly.
This state of affairs becomes more complicated as a result of the informality prevailing in the workplace. In organizations where flex time is in place, it’s difficult to make judgments on punctuality and time worked. Since casual dress pervades almost all working environments, a case for professional presence is almost impossible to formulate.
Therefore an argument can be made that either the probationary period should be eliminated or it should be extended to allow for the full impact of the new employee to be felt. Or the probationary period could be confined to corporate policies and shoe-horned into the new environment. Whatever approach is taken, it should be made clear to the employee from the beginning what the criteria for appraisal will be during the period.
A worker starting a new job has many tasks to learn. Without a clear description of what is expected, the probationary employee could be concentrating on the wrong issues. The appraisal criteria should be spelled out during the recruiting process. This allows the employee to focus on what her new manager feels is most important. She should then be judged on that set of criteria.
In cases where the criteria for evaluation is not spelled out, personality conflicts are more likely to be dominant in the decision-making process. The incidence of this situation is evident when a department is found to consistently reject probationary employees.
Such a high rejection rate of new employees can be costly for the organization both in dollars spent on recruitment, as well as reputation in the marketplace.
There should be a formalized appraisal process put in place for probationary employees at the time they start working for the organization.
The criteria as to what are deemed successful performance needs should be described and codified at the time the hiring search is initiated. By taking this tact, the instance of personalities is removed from the situation and the recruiter has a better basis with which to conduct the search.
Such an approach means each candidate has to tackle the same hurdles. Managers who are prone to judge success and thus future employment based on personality can be challenged. It provides all new employees with a more level playing field.
Fred Pamenter is managing partner with Pamenter, Pamenter, Brezer and Deganis Limited, a Toronto-based HR consulting and executive search firm. He can be contacted at (416) 620-5980 or [email protected].
Performance documentation and the legal question of contract status
There have been a number of instances where contracts have not been formally renewed, yet the contractor continues employment with both parties carrying on the charade that the contractor is not an employee.
This scenario represents an interesting dilemma. If an organization evaluates contract staff on the same basis as regular employees, it would seem that it was substantiating the premise that the contractor is actually an employee.
On the other hand, if the employer does not have an evaluation program in place, it is jeopardizing its ability to terminate the long-term contractor on the basis of performance. The courts would likely rule that, although the individual was called a contractor by the employer, the person was in effect an employee and entitled to the same termination benefits as a regular employee.
Stuart Rudner, an employment lawyer at the law firm of Miller Thomson in Toronto, said organizations walk a fine line when subjecting staff they don’t consider to be employees to a performance management process — especially if the relationship is supposed to be that of an independent contractor.
“I would be careful to distinguish between a contract worker, who is clearly an employee (for the duration of the contract), and independent contractors,” said Rudner. “It’s important to realize that imposing a performance management program can have a very profound and unintended impact on the legal relationship.”
That’s because courts will look beyond what the contract states in determining whether the employment relationship was that of an independent contractor or that of an employee. Even the best-drafted contract, written by the best lawyers, stating in the clearest terms that the contractor is not an employee, won’t hold water in court if the facts prove otherwise, he said.
“A performance management program is a good thing and you want to have ongoing reviews of your employee performance and ongoing feedback so they can improve their performance,” said Rudner. “But if you have someone who is really an independent contractor, who you’re not exerting control over and they’re not really a part of the organization, you might want to be very careful in imposing a performance management program.”
That’s not to say employers can’t discuss performance issues with independent contractors — that’s just a straightforward business relationship. But it becomes a bit hazier if it turns to things like the process or the tools being used or any of the indicia of an employment relationship.
“If you go too far you’re going to create an employment relationship,” he said. “You have to ask, ‘Is improved performance worth the risk that they might be found to be an employee?’”
