PIPs: When They Protect Employers — and When They Create Risk

In employment practice, Performance Improvement Plans (PIPs) are often viewed as a structured and relatively low-risk tool for addressing performance concerns while offering employees an opportunity to improve. In litigation, however, the legal significance of a PIP does not turn on its label, but on its practical effect and how it is implemented.

When used as a genuine performance management tool, a PIP may not constitute an adverse employment action. But where it is perceived as altering the terms of employment or signaling a predetermined outcome, it may become key evidence in discrimination or retaliation claims. 

If your organization uses or is considering implementing Performance Improvement Plans (PIPs), it is important to review how they are structured and applied to minimize the risk of being characterized as adverse employment actions or triggering discrimination or retaliation claims. For guidance on PIP design, compliance review, or management training, please contact the ILS Legal Team at contact@consultils.com.

Case Background

On March 13, 2026, the First Circuit held in Walsh v. HNTB Corp. that a Performance Improvement Plan (PIP), by itself, does not automatically constitute an “adverse employment action.”  

In this case, the employee was placed on a three-month PIP approximately ten months before her resignation. The plan addressed prior performance concerns and coworker complaints, outlined expectations for improvement, and reserved the employer’s right to terminate employment if necessary. At the conclusion of the PIP, supervisors determined that she had only marginally met expectations.

The court found that the PIP did not affect the employee’s compensation, benefits, title, or job responsibilities, nor did it limit her ability to pursue opportunities within the company. As such, it was viewed as a form of documented performance counseling, rather than a materially adverse action.

Importantly, the court emphasized that whether a PIP constitutes an adverse employment action is a fact-specific inquiry. Where a PIP alters employment terms or signals a predetermined outcome, it may still give rise to legal exposure.

Key Points of the Decision:

The court's analysis yields several important takeaways:

• A PIP is not an adverse employment action merely because it is issued. As the court observed, " [a] PIP does not have the same effect in every employment situation." The analysis is always fact-specific.

• A PIP is not adverse when used to warn an employee about performance deficiencies or to assist in developing a plan for skill improvement — provided it does not alter compensation, title, duties, or advancement opportunities.

• A PIP may be adverse if it imposes new job duties, changes terms of employment, or deprives an employee of potential advancement opportunities. Employers cannot assume PIPs are always legally safe.

• Clarity matters. Walsh argued her PIP's unclear and subjective criteria supported her discrimination claim. Vague or indefinite expectations in a PIP invite litigation.

• Framing matters. A PIP that signals a termination decision has already been made — rather than offering a genuine opportunity to improve — is far more likely to be treated as an adverse employment action.

  
  

Impact on Employers

Walsh provides meaningful protection for employers who use PIPs as a genuine performance management tool — but also highlights significant exposure where PIPs are poorly designed or misused. Key risks include:

• PIPs that alter compensation, benefits, title, duties, or advancement eligibility are substantially more likely to be found adverse employment actions.

• PIPs framed as punishment or as signaling that termination would increase discrimination and retaliation exposure.

• Inconsistent application of PIPs across employees — particularly those in protected classes — is one of the most common triggers for claims.

• Inadequate documentation of performance concerns, both before and during the PIP, weakens an employer's defense in litigation.

  
  

Pitfalls for Employers to Avoid

• Frame the PIP as an opportunity to correct performance or behavior — not as punishment and not as a signal that a termination decision has already been made. The goal should be successful improvement, not the building of a disciplinary record.

• Avoid vague or indefinite standards. Set clear, measurable expectations. Explain what is required and how improvement will be assessed.

• Clearly articulate performance deficiencies with specific examples of the problems and ways to correct them. Use the employee handbook, job descriptions, or prior performance evaluations as reference points.

• Ensure PIP expectations are attainable, realistic, and consistent with what is expected of others in the same work group.

• Do not alter the employee's compensation, benefits, duties, or title during the PIP. Any such change substantially increases the risk of an adverse action finding.

• Do not assign new or less desirable duties, or create new obligations beyond addressing the documented performance deficiencies.

• Do not disqualify the employee from promotions, transfers, or participation in incentive and benefit programs during the PIP period.

• Document meetings, 1-on-1s, and interactions throughout the PIP period. Retain records of performance concerns leading to the PIP as well as any continuing concerns. If the matter ends in litigation, management will only be able to rely on what is clearly documented.

Walsh v. HNTB Corporation confirms that a properly designed PIP — one that offers a genuine opportunity for improvement without altering employment terms or signaling a predetermined outcome — is unlikely to constitute an adverse employment action. Employers should review their PIP policies and practices in light of this decision and consult with employment counsel to ensure compliance.

If your organization uses or is considering implementing Performance Improvement Plans (PIPs), it is important to review how they are structured and applied to minimize the risk of being characterized as adverse employment actions or triggering discrimination or retaliation claims. For guidance on PIP design, compliance review, or management training, please contact the ILS Legal Team at contact@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949

Yuki is a litigation senior counsel licensed to practice in both New York and California, with extensive experience in dynamic investigations and complex defense matters. Her practice focuses on personal injury, insurance defense, and construction defect litigation, where she is known for developing efficient, multidimensional strategies.

Before joining ILS, Yuki practiced in both New York and Los Angeles, gaining comprehensive experience representing both plaintiffs and defendants. Since 2020, she has concentrated on insurance defense and construction disputes, recognized for her thorough investigations and precise legal analysis. Since joining ILS in 2023, she has continued to provide clients with strategic, experience-driven litigation support.

Email: contact@consultils.com | Phone: 626-344-8949