Placement on PIP Without Change to Job Status Not Adverse Employment Action

Joining several of its sister courts, the Third Circuit has held that, unless accompanied by a change in pay, benefits, or employment status, placement on a performance improvement plan (“PIP”) does not amount to an adverse employment action for purposes of the Age Discrimination in Employment Act (“ADEA”). Noting concerns over “naked claims of discrimination and greater frustration for employers seeking to improve employees’ performance,” the Reynolds v. Department of Army Court reinforces the notion that employers can utilize PIPs as a means to improve employee performance and conduct with decreased apprehension that the employee will initiate legal action based on the presence of the PIP alone.

Factual Background

Plaintiff Raymond Reynolds was employed by the U.S. Army as an engineer. In August 2004, Reynolds’ supervisor evaluated Reynolds’ performance, determined that he had failed to meet two out of his seven job objectives, and subsequently placed him on a PIP on November 3, 2004. Under the PIP, Reynolds was given 90 days either to bring his performance to an acceptable level or face the possibility of reassignment, demotion, or termination. One day after receiving the PIP, Reynolds applied for the Voluntary Early Retirement Authority (“VERA”) and Voluntary Separation Incentive Pay (“VSIP”) programs, which confer certain benefits to eligible federal employees who accept an early retirement and/or separation from federal service.

In December 2004, Reynolds submitted a complaint to the Equal Employment Opportunity Commission, alleging age discrimination. Subsequently, Reynolds was offered a 90-day extension on his PIP, but was denied an extension of time for accepting VERA/VSIP benefits (for which he had by then been approved). Reynolds declined the PIP extension, but stated that he would have accepted the extension and remained on the job had he also received an extended window for electing VERA/VSIP.

Instead, on January 3, 2005, Reynolds exercised his early retirement option through VERA/VSIP and, in return, received an incentive payment of $25,000 and a reduced annuity.

Court’s Decision

The Third Circuit Court of Appeals unanimously affirmed the district court’s grant of summary judgment to the Department of the Army on Reynolds’ discrimination claim under the ADEA, finding that “Reynolds has not raised a dispute of material fact as to whether he was the subject of an adverse employment action, and has thus failed to set forth a prima facie case of discrimination.” As established by the Supreme Court of the United States’ seminal decision in Burlington Industries v. Ellerth, an adverse employment action is defined as a “significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.”

Citing with approval decisions from the Seventh, Eighth and Tenth Circuit Courts of Appeals, which rejected the idea that a PIP can be considered an adverse action, the Reynolds Court similarly concluded that because Reynolds “failed to demonstrate that his PIP was accompanied by an adverse change in the conditions of his employment” such as “accompanying changes to pay, benefits, or employment status” his placement on a PIP did not qualify as an adverse employment action. In reaching this conclusion, the Court rejected Reynolds’ argument that “the placement, timing and framing of the PIP are steps viewed together, along with the totality of the circumstances and other ageist actions, which reflect an intent to ‘get rid of Ray’ and compelled him to retire or face certain termination.”

Important to the Court’s decision was a discussion on how PIPs differ significantly from the usual types of employment actions that qualify as adverse:

As illustrated by this case, PIPs are typically comprised of directives relating to an employee’s pre-existing responsibilities. In other words, far from working a change in employment status, a PIP is a method of conveying to an employee the ways in which that employee can better perform the duties that he or she already has. We note that a likely consequence of allowing suits to proceed on the basis of a PIP would be more naked claims of discrimination and greater frustration for employers seeking to improve employees’ performance.

Implications for Employers

The Reynolds decision is helpful for employers. Indeed, it reinforces an employer’s ability to properly utilize PIPs as a means of monitoring and measuring an employee’s work product and conduct.

To discuss any of your company’s employment-related needs, contact any attorney in the Gibbons Employment & Labor Law Department. And watch for more posts on training and information about exciting new Gibbons educational programs on this blog.

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