Inconsistent Reasons Provided for Performance Plan Suggest Pretext

Takeaway: Employers must take care to properly and fairly implement performance action plans to avoid the perception that “the game is fixed” and termination inevitable. 

A manufacturing company’s inconsistent explanations for imposing an unattainable performance action plan on a long-time engineering employee with a strong performance history convinced the 7th U.S. Circuit Court of Appeals to reverse summary judgment for the employer and allow the employee’s Age Discrimination in Employment Act of 1967 (ADEA) claim to proceed.

Toolkit: Employing Older Workers

The plaintiff began working for his employer, a leading manufacturer of construction and mining equipment, in 1979. He was promoted to senior design engineer after obtaining his engineering degree. In August 2000, he and other engineers over the age of 40 were passed over for promotion. After the employee complained that he was not promoted because of his age, he was placed on a performance action plan and later fired.

The employee sued the manufacturer for age discrimination and retaliation under the ADEA. The employer was granted summary judgment on the age discrimination claim, but the retaliation claim went to trial, and the plaintiff was awarded double his lost wages and reinstatement.

In 2008, the employee was promoted to serve as “job owner lead,” a leadership role on an engineering team. In early 2016, he was asked to lead a sound reduction project while continuing to fulfill his existing responsibilities as a unit leader. Between 2013 and 2017, his performance reviews consistently indicated that he either met or exceeded expectations. The project was successfully completed in late 2017, and the plaintiff was publicly commended.

In January 2018, the employee’s supervisor complained to human resources that his performance had declined. However, his 2017 final performance review indicated that he met or exceeded expectations in every evaluation category. Despite his positive review, he was placed on a performance action plan purportedly related to his job performance, attendance, interpersonal relationships, and leadership style.  

Toolkit: Managing Employee Performance

The company later told the U.S. Equal Employment Opportunity Commission that the performance action plan was partially prompted by allegedly inappropriate comments the employee had made to two Asian co-workers in early 2018. However, both his supervisor and HR representative testified at trial that they had decided to initiate the plan before learning of the alleged comments.

The action plan “stated that his failure to successfully complete and sustain improvement on the action items listed above could result in reassignment, demotion, and/or disciplinary action, up to and including separation.” The employee objected that the deadline for one action item had already passed — meaning that he was already in violation of the plan — but the HR representative refused to amend the plan. The final plan delivered to the employee one day later was identical to the proposed plan. Further, the HR representative, the supervisor, and the supervisor’s supervisor had already signed the plan, indicating with their signatures that the employee had failed to meet its requirements.

Believing that putting him on a performance action plan that he had already violated was merely a pretext for his termination, the employee refused to agree to its terms and resigned several days later. He sued and the district court granted summary judgment for the employer on all claims. 

On appeal, the 7th Circuit addressed an evidentiary issue — the admissibility of the supervisor’s “desk notes” on the plaintiff — before turning to the merits of the case. The employer supported its motion for summary judgment with these notes, which were observations and criticisms of the employee. The court, however, said the notes were out-of-court statements offered for the truth of their contents, making them hearsay. Further, the notes did not qualify for the business records exception to hearsay because the employer failed to show that the supervisor regularly took notes on other employees or that any other internal mechanism ensured the accuracy of the records.

Focusing specifically on the age discrimination claim, the court found the employee had presented sufficient evidence for a reasonable jury to conclude that he was constructively discharged, one of the four elements of an age discrimination case. Although the employer’s decision to place the employee on a performance action plan would not alone be sufficient to establish constructive discharge, this particular plan imposed a deadline that had already passed, placing the employee in violation from the outset.  

Further, when the employee pointed out this deficiency, company representatives refused to make any change to the plan and signed the document in a box labeled “Did Not Meet Action Plan.” Although the company argued that its regular practice was to have supervisors pre-emptively sign performance action plans as having been failed, it presented no evidence that any other employee’s performance action plan was treated similarly.

“[T]he handwriting may not have been on the wall, but it was certainly etched into the signature block of the action plan, and the axe was poised to fall because [the employee] was already in breach of the plan’s terms,” the court said. A reasonable jury could find termination was a foregone conclusion, the court held, stating that a genuine dispute of material facts existed as to whether the employee was constructively discharged.

The court noted it has long held that an employer’s shifting and inconsistent explanations for an adverse employment action can support an inference of pretext. In this case, the employee received excellent performance evaluations throughout his decades-long career. Most notably, in his performance review immediately preceding the action plan, the employee’s supervisor rated him as meeting or exceeding expectations in every category.

The employer’s criticism centered on the employee’s alleged difficulty transitioning from a technically focused role to his position as a job owner lead, which requires effective delegation and team management. The court acknowledged that the employee’s focus on the technical aspect of projects may have led to occasional lapses in fulfilling managerial duties but noted that “even in that domain, his reviews reflect at least satisfactory performance.”

The court’s pretext inquiry further revealed conflicting accounts concerning the reasons the employee was placed on the plan and whether his allegedly inappropriate 2018 comments were factors. “The inconsistency casts doubt on the credibility of [the company's] proffered reasons for the constructive discharge,” the court said, noting that these discrepancies added to the case for pretext.

“A reasonable jury could find that the employer’s justification was overstated and inconsistent with the totality of the evidence — making summary judgment improper,” the court held.

Turning to the retaliation claim, the court said that the plaintiff had not offered evidence sufficient to support a causal connection between his protected activity — suing his employer in 2005 for ADEA discrimination — and the adverse employment action. The 10-year delay between the protected activity and the adverse employment action “undercuts a reasonable inference of causation.” This delay, coupled with the employee’s failure to offer any evidence of retaliatory motive, would not support a reasonable jury’s inference of retaliation, the court concluded, affirming summary judgment on the retaliation claim.

Murphy v. Caterpillar Inc., 7th Cir., No. 24-1517 (June 18, 2025).

Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.