What’s an Adverse Employment Action? 5 Key Steps for HR Compliance

How bad does a job action have to be to create a right to sue? Sometimes, the answer is easy. For example, if an employee is terminated or demoted for a bad reason, that clearly counts as an adverse employment action – and they have a lawsuit ready and waiting.

But at other times, the question is closer and the line can be blurred.

A new ruling from a federal appeals court explains how a recent U.S. Supreme Court decision lowered the bar for plaintiffs, making it easier to show that the adverse employment action they experienced at work was bad enough to entitle them to legal relief.

Uneven Job Performance Leads to PIP

Bethany Scheer worked for a health system in its physician billing department. Her duties included researching and appealing outstanding medical claims, contacting insurance companies and taking on special projects. In her first four years on the job, she was issued seven corrective actions because she didn’t meet productivity targets. The court’s decision called her job performance “inconsistent.”

In August 2019, her supervisor drafted a performance improvement plan for her and sent it to the company’s HR director. Around the same time, Scheer told a co-worker, a different supervisor and her department manager that she was having “personal issues.”

All three reported concerns about Scheer’s well-being, and one emailed the HR director to say that Scheer had talked about committing suicide.

Employer Requires Counseling With EAP 

After the HR director received that news, she adjusted the performance improvement plan to include a mandatory referral to counseling with an employee assistance program. Scheer was told that visiting with the EAP was a condition of continued employment.

When Scheer refused to sign an EAP referral form, her employment was terminated.

She filed an ADA lawsuit, alleging the company fired her because it wrongfully perceived her as having a mental illness.

What Is an ‘Adverse Employment Action’?

A federal district court ruled against her, finding the mandatory referral to counseling was not an “adverse employment action.” It said Scheer was terminated because she didn’t fulfill a condition of the PIP – not because of any perceived disability. 

Shortly afterward, the U.S. Supreme Court ruled in a different case that an adverse employment action, for purposes of creating a right to sue, includes any action that causes “some harm” relating to a term or condition of employment.

Armed with the benefit of the new ruling, Scheer filed an appeal. A federal appeals court vacated the district court’s ruling and remanded the case.

It said that although the district court had “dutifully followed” applicable precedent when it ruled for the employer, the intervening Supreme Court ruling changed the game. The lower court needs to look at the case again, the appeals court explained.

The case was returned to the lower court for further development.

Next Steps for HR Leaders

In light of the changing legal landscape around adverse employment actions, HR leaders need to rethink how they handle performance and employee issues.

1. Understand What Counts as an Adverse Employment Action

After the Supreme Court decision, any job action that causes “some harm” could count as an adverse employment action – even if it’s not a termination or demotion.

Action Steps for HR:

• Audit performance management tools (PIPs, written warnings) – ensure language is constructive, not punitive.
• Train managers to document specific performance issues, not assumptions about health or motivation.
• When considering new conditions of employment (like mandatory counseling), consult legal before implementing such requirements.

2. Guard Against ‘Perceived Disability’ Bias

Employees who are merely perceived to have a disability are just as protected by the ADA as those with documented conditions.

Action Steps for HR:

• Add “perceived disability” scenarios to anti-discrimination training for supervisors.
• Reinforce “if you see something, share with HR – but don’t diagnose, speculate or comment.”
• Make sure HR – not frontline managers – handles all disability-related discussions and documentation.

3. Use Counseling & EAP Referrals Carefully

Mandatory counseling tied to discipline or performance management can now more easily be challenged.

Action Steps for HR:

• Provide alternative, non-medical corrective measures, like coaching or mentoring, as an initial step.
• Keep EAP voluntary at first; if referral is mandatory, confirm it is job-related and a business necessity (e.g., role involves safety or essential duties at risk).
• Document the legitimate performance or safety reasons behind an EAP referral.

4. Review ADA Compliance at Three Stages

When it comes to medical questions and exams during hiring and employment, it’s important to know the rules under the ADA.

Before making a job offer, do not ask about an applicant’s health, medical history or ability to handle stress – focus only on their job duties. After a conditional offer, medical exams can be required, but they must apply equally to all candidates in the same job category. For current employees, medical exams or questions should be asked only when clearly related to job performance or safety concerns.

Action Steps for HR:

• Update interview scripts, hiring checklists and onboarding materials.
• Train recruiters and hiring managers annually on the do’s and don’ts of interviewing.
• Audit policies for confidentiality of medical info to ensure ADA compliance.

5. Strengthen Your Review of Adverse Employment Actions

Lower threshold for lawsuits means more claims will make it into court.

Action Steps for HR:

• Formalize a thorough review process. Adverse employment actions related to an employee’s health, attendance, or suspected medical issues must be reviewed and vetted by HR.
• Create a response protocol for ADA complaints. Outline who investigates, documents, and communicates next steps.
• Reach out to legal counsel as needed. Leverage their expertise to stay informed on ADA compliance and reduce legal risks. 

Scheer v. Sisters of Charity of Leavenworth Health System, Inc., No. 24-1055 (10th Cir. 7/21/25).