A former Yahoo Inc. employee is suing the Internet company, alleging that a manipulated employee-rating system, as well as gender bias, led to his illegal termination.
In the lawsuit, plaintiff Gregory Anderson said he had gotten a promotion, a raise and compliments for his work before he was told in November 2014 that he was in the bottom 5% of Yahoo's employees based on quarterly performance reviews and would lose his job.
At the time, Anderson had been with the Sunnyvale-based company for four years and was the editorial director in charge of Yahoo's autos, shopping, homes, travel and small-business sites.
He said he learned of his termination while doing a Knight-Wallace fellowship at the University of Michigan for mid-career journalists — a program he said he received his superiors' approval to attend. Anderson was one of about 600 employees laid off that November based on results of the quarterly performance reviews, according to the lawsuit.
The lawsuit was filed Monday in U.S. District Court in San Jose.
Anderson is alleging violations of the state and federal WARN acts, which require employers to notify employees before large layoffs. The lawsuit also says Yahoo should have compensated those laid-off employees for up to 60 days.
Anderson is also alleging gender discrimination, saying the media group at Yahoo favored women.
Yahoo said its quarterly review process allows employees to “develop and do their best work.”
“Our performance review process was developed to allow employees at all levels of the company to receive meaningful, regular, and actionable feedback from others,” the company said in a statement. “Our performance review process also allows for high performers to engage in increasingly larger opportunities at our company, as well as for low performers to be transitioned out.”
Yahoo is no stranger to layoffs. The company terminated 2,000 employees in 2012, shortly before Marissa Mayer became chief executive, and has since had several more rounds of layoffs, although it has not disclosed the numbers of jobs cut.
Tamara Devitt, a labor and employment attorney at Haynes and Boone, said it’s not uncommon for people alleging they were wrongfully terminated to point to performance reviews as evidence. But Anderson’s case is slightly unusual because he’s arguing that the system was manipulated to result in his termination.
"He’s really taking on the whole industry of employment performance reviews and how people do them," Devitt said.
The quarterly performance review was instated by Mayer in 2012. Managers rate employees on a scale of zero to 5 based on how that worker performed compared with immediate peers, according to the lawsuit. Once that number is determined, the employee is placed into one of five ranks, or "buckets."
The lawsuit says managers were required to rank employees so that a specific percentage would be placed in each rank, "even if all the employees were performing well or at the same level."
The second step of the review process involved input from higher-level management "who often had no actual contact with the employees whose score they were modifying," the lawsuit said.
Employees were not told their numeric score or how it was determined, according to the lawsuit; rather, it said, they learned only their rank or that they were being terminated because of that rank, as the score and level could result in immediate termination.
"The [quarterly performance review] process was opaque and the employees did not know who was making the final decisions, what numbers were being assigned by whom along the way, or why those numbers were being changed," the lawsuit says. "This manipulation of the QPR process permitted employment decisions, including terminations, to be made on the basis of personal biases and stereotyping."
The lawsuit alleges that, based on company policy, Anderson was not subject to the performance review because he was on approved leave.
Anderson also says he may have been terminated because he reported that an employee tried to bribe him to reduce a co-worker's performance score. The lawsuit says that employee had a "personal relationship" with Anderson's manager, who later gave Anderson a low score.
In its allegations of gender discrimination, Anderson’s lawsuit says one of his superiors, who reported directly to Mayer, publicly expressed support for increasing the number of women in media.
The superior, Chief Marketing Officer Kathy Savitt, "intentionally hired and promoted women because of their gender, while terminating, demoting or laying off male employees because of their gender," the lawsuit says.
It also alleges that women were treated better by managers in the media group. While men were immediately terminated after receiving low employee scores, women were allowed to appeal their ratings, the suit says.
Anderson is seeking unspecified damages, as well as back pay, benefits and $500 for each day that he was entitled to receive advance notice under the federal and California WARN acts.
Although Yahoo probably can handle this lawsuit — it is, after all, an individual complaint, not a class action — the struggling tech company could probably do without the distraction right now.
The company faces mounting pressure from investors to increase profit and revenue and to outline a clear path to growth. With its growth prospects dwindling, Mayer is expected to announce significant cost-cutting across the company during its quarterly earnings call Tuesday afternoon.