In the current world of work, aspects such as a good work-life balance and the mental health of employees are becoming increasingly important. This development is to be welcomed in principle, but presents companies with the task of reconciling their economic interests with this change. A key challenge is to identify high-performing employees and at the same time deal constructively with underperformers.
Several well-known companies have recently caused discussion when it became known that they use internal classification systems for their employees. For example, SAP used a system with the categories "Performer", "Achiever" and "Improver". This raises questions about the admissibility of such evaluation systems under employment law.
Legal basis of the obligation to pay benefits
Employment contracts oblige employees to perform work in accordance with certain time and contractual requirements - but not to achieve specific results. For example, sales employees do not necessarily have to achieve specific sales targets. Nevertheless, work performance remains an essential element of the employment relationship, even if it is sometimes difficult to measure objectively.
The specific performance obligation varies depending on the individual situation and is primarily based on the provisions of the employment contract. As these often do not contain detailed performance criteria, the rule formulated by the Federal Labor Court applies: "The employee must do what he is supposed to do and do it as well as he can." The mere fact that an employee performs less than their colleagues does not constitute a breach of contractual obligations.
Reduced performance and termination options
Dismissal due to inadequate performance can be lawful in principle, but in practice it proves extremely difficult to enforce. In the case of dismissal for conduct-related reasons, the employer must prove that the poor performance is due to a breach of duty and that the work performance of the employee in question is significantly below the level of comparable colleagues.
A well-founded performance evaluation is required for this proof. However, if the dismissed employee can plausibly demonstrate that he has fully exploited his personal abilities despite the objective performance deficits, there is no breach of duty and therefore no reason for dismissal.
Alternatively, dismissal for personal reasons may be considered if the employee falls significantly short of the employer's legitimate expectations with regard to the relationship between performance and remuneration. However, such dismissals often fail in court, even if they have been prepared by extensive documentation and support measures such as performance improvement plans.
Legal framework for benefit categorizations
As work performance is a legitimate evaluation criterion, the classification of employees into performance categories is generally permissible. A frequently raised objection concerns data protection; in particular, the classification as low performers could be perceived as damaging to reputation.
However, these concerns are generally not valid, as the assessment and categorization of work performance is legitimate under data protection law as long as it is necessary for the performance of the employment relationship. The assessment of performance and willingness to perform forms an important basis for personnel planning, the optimal deployment of employees and their professional development.
Based on these evaluations, employers can legitimately decide on promotions or transfers. In the event of performance deficits, they typically first examine further training measures or adjustments to the area of responsibility before considering possible termination scenarios. Performance evaluations are also relevant for remuneration decisions and represent an objective differentiation criterion that is compatible with the principle of equal treatment.
Limits of employee evaluation
However, the evaluation and categorization of work performance is subject to certain restrictions. Under data protection law, the processing of personal data must be limited to the necessary minimum. Companies should clearly define which persons have access to evaluation data and for what purpose. The company-wide dissemination of lists of high-performing or low-performing employees would be problematic, as such an encroachment on the personal rights of those affected could hardly be justified by a legitimate interest.
There are also limits to the recording of performance. Comprehensive automated monitoring of all work steps is usually incompatible with personal rights, as it creates a permanent pressure to adapt and monitor.
Employees' rights in performance evaluations
Many employees will disagree with their performance appraisal, which raises the question of how to appeal. As a rule, a formal right to correction only exists if the evaluation contains factually incorrect assertions, such as the inaccurate statement that an employee does not have certain skills.
However, personnel decisions based on performance evaluations are subject to review. For example, if bonus payments are granted based on performance ratings, an employee could challenge the bonus calculation by arguing that their performance was wrongly assessed as below average. From an HR strategy perspective, it is advisable to give employees the opportunity to have an objection to the evaluation documented in their personnel file.
Unauthorized dissemination of performance appraisals would be legally punishable. Those affected can respond by seeking injunctive relief and damages if their assessment is made accessible to an unreasonably large group of people in violation of data protection regulations. Data protection authorities could impose fines in such cases - not only for deliberate publication, but also for data protection violations due to inadequate security measures.
If the determination of inadequate performance leads to dismissal, the employee can of course the option of taking legal action against dismissal.
Works council co-determination in evaluation systems
The introduction of systematic performance categorizations is generally subject to the co-determination of the works council, if one exists in the company. Pursuant to Section 94 (2), 2nd half-sentence of the Works Constitution Act, the works council must have a say in the definition of general assessment principles. This includes, in particular, the categories used and the criteria for classification.
The individual evaluation of individual employees, on the other hand, is not subject to co-determination and does not constitute a personnel measure requiring approval in accordance with Section 99 of the Works Constitution Act.
It is important to note that the works council has no right of initiative in determining appraisal principles. The fundamental decision as to whether employees should be categorized according to performance criteria is the sole responsibility of the employer. However, further co-determination rights arise if pay decisions or personnel measures such as transfers, dismissals or promotions are linked to the performance evaluation.
Conclusion: Balanced performance evaluation in a modern working environment
Despite the challenges of objectively measuring performance and dealing appropriately with performance deficits, work performance remains a central element of the employment relationship. Employers are allowed to evaluate and document the performance of their employees and make personnel management decisions on this basis - in compliance with the legal framework and with respect for the personal rights of those affected.
In a working world that is increasingly characterized by work-life balance and mental well-being, companies must find a middle ground that takes into account both performance orientation and the modern requirements for an employee-friendly working environment. A transparent, fair and legally compliant performance evaluation can be a valuable tool to promote both corporate goals and the personal development of employees.
