Hollywood award season has finally come to an end, closing the chapter on a faux feud between a doll with an affinity for pink and a World War II scientist. Whether you are a cinephile or prefer not to spend your Sunday night listening to acceptance speeches, award season serves as a reminder to employers to evaluate their current employee award systems. While employers may not host large galas broadcast to millions of viewers while awarding trophies for best performances, many employers do utilize smaller scale award programs in an effort to motivate and acknowledge employees, such as recognizing an "employee of the month." However, when poorly implemented, employment award programs can open employers up to liability and litigation, and, therefore, it is important to make sure an employee award system has clear terms, is implemented fairly, and is actually accomplishing its intended purpose.
 
The Equal Employment Opportunity Commission (EEOC) takes the position that discriminatory practices that affect compensation indirectly, like performance appraisals and promotion decisions, can violate anti-discrimination laws such as Title VII of the Civil Rights Act (Title VII), the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA). Similarly, a discriminatory employee award program may have the effect of preventing employees in a protected class from a better salary or chance of promotion, which could lead to a violation of anti-discrimination laws. Employer liability may also arise if employees receiving awards are not treated equally. For example, if there is a prize or other form of recognition for an "employee of the month," the employer must ensure that all recipients are given the same prize and recognition.

A review of discrimination cases across the country reveals how these discrimination claims play out in practice. Most commonly, employees have sued employers for not receiving the award under both theories of discrimination and creating a hostile work environment. While many courts find that failure to obtain an award alone is not enough to support a claim for discrimination or a hostile work environment, it can certainly be evidence of discrimination if combined with other discriminatory actions and depending on the severity of the situation. Regardless, an employee bringing a lawsuit or administrative complaint for not receiving an award may still result in costly litigation, which employers should seek to avoid.  
 
"Employee of the month" awards may also make terminating an employee more complicated. In multiple published lawsuits, an employee on the receiving end of an adverse employment action pointed to the previously conferred "employee of the month" award to show the employee was qualified for the job and performing competently, so the employee should not have been terminated or demoted. In this scenario, it may be more difficult for the employer to justify their actions. 
 
The timing of the implementation of an employee award program may also implicate labor laws. In a 1986 case coming out of the Fourth Circuit, a union alleged the employer's suspicious timing of the implementation of an employee of the month award was used to encourage voting against the union organizational effort occurring at the same time. While the court did not agree with the union, this case nonetheless serves as an example of how the timing of the implementation of the program itself may be challenged. S. Maryland Hosp. Ctr. v. N.L.R.B., 801 F.2d 666 (4th Cir. 1986). Therefore, before implementing an employee award program, employers should evaluate environmental factors to determine whether the decision to implement the program could be perceived as discriminatory itself or as a potential violation of labor laws. 
 
As an "employee of the month" award may create exposure, in addition to ensuring the program is implemented fairly, it is also important for employers to evaluate whether their current award system is achieving its goals. There are mixed reviews regarding the effectiveness of a program that only exalts one employee compared to a system that encourages feedback to multiple employees and on a more immediate basis. 
 
If an employer determines that the "employee of the month" system is beneficial for its workplace, or deletion of the program would be too negatively received, then there are ways to ensure the award system is less likely to result in liability. First, employers should make the standards for receiving the award clear and based on non-discriminatory factors. An arbitrary award system with no defined parameters will be more easily viewed as potentially discriminatory and it will be more difficult for the employer to show that the selection of a certain employee for an award was not discriminatory. Second, when an award is received, it may help to explain clearly why the particular employee was selected for the award. For example, explaining how the particular employee excelled during the relevant time frame. And, if the award was given to recognize improvement to encourage a struggling employee to continue to improve (and not necessarily because the employee was a top performer) and this reason is documented by the employer, it would be more difficult for an employee to claim that the receipt of the award is evidence that they met the employer’s performance expectations, if they were later terminated. 
 
In the end, every employment situation and dynamic is different. As discussed above, existing lawsuits that employees have filed regarding "employee of the month" programs provide insight about what to avoid and what to change with current award systems. Please contact Hannah Oates or one of Ice Miller LLP's attorneys in the Workplace Solutions Group if you have any questions regarding employer award programs like "employee of the month."

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.