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Recent decisions from federal courts are providing employers with additional guidance on when a performance improvement plan (PIP) may qualify as an adverse employment action to state discrimination claims under federal law.

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The courts have held that PIPs that inform an employee about their performance deficiencies and provide corresponding ways to improve may not constitute an adverse employment action. However, those that add new and different job responsibilities, alter titles or compensation and/or limit future growth opportunities may rise to the level of an adverse employment action.

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The Supreme Court’s 2024 ruling in Muldrow v. City of St. Louis that lowered the threshold for what a plaintiff must demonstrate to bring a discrimination claim under Title VII of the Civil Rights Act raised a lot of uncertainty about when an employment decision will meet the new “some harm” standard. Previously, some federal circuits required that employees had to meet a “materially adverse” or “significant harm” standard, and so much of the case law that developed for years about what employment actions may constitute adverse employment actions is now outdated. Subsequent federal court decisions are starting to clarify this issue, though, particularly with respect to the topic of corrective action plans.

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In Walsh v. HNTB Corp., the plaintiff sued her former employer for unlawful age discrimination under the federal Age Discrimination in Employment Act (ADEA) and under Massachusetts law, alleging discrimination because she was placed on a three-month PIP.The U.S. Court of Appeals for the First Circuit held that post-Muldrow there is “no one-size-fits-all answer” for whether a PIP qualifies as an adverse employment action. However, the court did distinguish between a PIP that may be actionable and one that is unlikely to form the basis of a claim. When a PIP is issued “to warn an employee about performance deficiencies or assist an employee in developing a plan to achieve an identified opportunity for skill development,” the First Circuit said it is not an adverse employment action. Changes caused by a PIP that are within the employee’s normal scope of employment do not adversely affect the terms and conditions of their employment. The First Circuit said, conversely, when a PIP “impose[s] new job responsibilities, change[s] the present terms of employment, or deprive[s] an employee of potential advancement opportunities,” it can qualify as an adverse employment action.&nbsp;

In its decision, the First Circuit cited several similar holdings from other federal court cases that were issued after Muldrow. For example, in Arnold v. United Airlines, the Seventh Circuit found that a PIP did not constitute an adverse employment action because it did not affect the plaintiff’s compensation, benefits or working hours. While the plaintiff received some new and additional assignments, they were all within the normal scope of her employment and she did not allege that the assignments were impossible to complete. Thus, the court found it did not adversely affect the terms and conditions of her employment. Contrast that with a holding from the Southern District of New York (“SDNY”) in 2024 that a PIP could constitute an adverse employment action because it saddled the plaintiff with more work and worse tasks, set unrealistic deadlines, tarnished her permanent record, dampened her prospects of a promotion or raise and temporarily prevented her from transferring to another division. “Although some of these actions might once have been considered immaterial … they are now enough to state a claim.”

Practical Applications for Employers

The recent rulings provide important insight for employers on best practices when preparing and implementing PIPs in the post-Muldrow era. Employers should review their current policies and practices and, where applicable, modify them to avoid anything that could be used to form the basis of a future discrimination claim. For example, employers should avoid the use of corrective action plans that impose new or additional job responsibilities outside the scope of the employee’s current position or set unrealistic expectations or deadlines. Employers should also consider avoiding PIPs that amend an employee’s title or compensation, permanently alter their record in a manner that prevents future opportunities for advancement or prevent them from transferring into a new position or division. In short, PIPs should be used for limited and remedial purposes – to identify an employee’s specific performance issues, document that the employee was advised as to why and how they are not meeting expectations, and provide a road map identifying achievable ways the employee can, and is expected to, improve. A PIP that is effectively designed to set an employee up to fail could be used to question whether the employer was motivated by something other than the employee’s unsatisfactory performance. That said, it should be noted that a PIP is not ultimately determinative on the question of whether the employer was in fact motivated by an illegal bias. For example, while the claim in Anderson survived the motion to dismiss, the SDNY ultimately granted summary judgment for the defendant because the plaintiff could not establish that the PIP was implemented for discriminatory reasons.

BakerHostetler’s Labor and Employment Practice Group has significant experience in preparing and counseling clients on the use of PIPs as well as defending against employment discrimination claims and is available to assist your organization as well.

Court Rulings Clarify When Performance Improvement Plans May Form Federal Discrimination Claims

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