Labor & Employment Law Update

In the U.S. Supreme Court’s 2024 Muldrow v. City of St. Louis decision, the Court expanded the legal standard for what qualifies as an “adverse employment action” by pivoting from asking whether a change to an employee’s terms or conditions of employment was “material” to whether  the change left the employee worse off in those terms or conditions. Unsurprisingly, employers saw a surge of challenges to everyday management decisions in the immediate aftermath.

The First Circuit’s recent decision in Walsh v. HNTB Corp., however, offers an important clarification that should hopefully serve as a blueprint for other courts dealing with this influx of questionable lawsuits.

In Walsh, the Court made clear that even under Muldrow’s broader standard for what qualifies as an “adverse employment action,” not every uncomfortable workplace decision, including one tied to alleged bias, creates employer liability. The decision also serves as a reminder that while difficult management decisions are not risk-free, the specific facts and context surrounding them matter.

Walsh addressed a situation that is all too common for some employers: a 26-year veteran employee was placed on a three-month performance improvement plan (“PIP”) following consistent and documented criticisms of her work. She successfully met the goals of the PIP but resigned approximately 10 months later.

Following her resignation, Walsh brought an age discrimination suit, claiming the PIP and events and treatment that followed amounted to unlawful age-based discrimination and a constructive discharge. The trial and appellate courts disagreed, effectively demonstrating that even the broad Muldrow standard still has meaningful limits.

How Courts Are Evaluating Adverse Employment Actions After Muldrow

What makes the Walsh decision worth attention in other circuits is not its outcome alone, but how the court got there. In reaching its decision, the court applied the Supreme Court’s Muldrow analysis but still rejected the idea that a PIP is automatically actionable. Instead, the court focused on what actually changed for the employee and held that Walsh’s PIP did not alter her title, compensation, or core responsibilities, nor did it limit her ability to pursue opportunities within the company.

In action, it functioned as documented counseling, identifying perceived performance issues and outlining expectations for improvement. Even assuming Walsh experienced the PIP as negative or unfair, as many employees do, it did not change the conditions of her employment in a way that satisfies the Muldrow standard.

The constructive discharge analysis in Walsh is just as illuminating. Walsh pointed to a strained relationship with her supervisor, criticism of her work, and at least one comment suggesting she could be replaced by “younger, cheaper” employees. She also described what she saw as micromanagement and unfair treatment following the PIP. The court considered those allegations but still found they did not rise to the requisite level to show that a reasonable employee would have felt compelled to resign.

That part of the decision underlines that the legal standard remains objective and demanding; the law cannot eliminate personality conflicts, management style differences, or frustration with internal decisions. Even comments that suggest prejudice or discriminatory motive will not, standing alone, change a difficult working environment into a constructive discharge.

Although the Walsh decision is not binding across the federal circuits, several other courts, including those situated in the Seventh Circuit – which covers Illinois, Indiana, and Wisconsin – have already begun applying Muldrow beyond the confines of Title VII, including in age discrimination cases. The result of that application is that plaintiffs are increasingly framing regular management actions as adverse employment decisions. Walsh provides a helpful response to that trend and attempts to reinforce that the focus should remain on tangible changes to the job itself, not on how an employee feels about a decision or how workplace dynamics develop afterward.

What Walsh Means for Employers

For employers, the takeaway should not be that PIPs or other tough management decisions are risk-free. It should instead be that the analysis remains grounded in what actually changes about the employee’s job. A PIP that restructures duties, affects compensation, or meaningfully limits advancement opportunities may present a very different case. A PIP that documents concerns and sets expectations, without more, is far less likely to do so.

To minimize risk and be effective, PIPs should be grounded in objective, job‑related expectations and should also identify specific performance gaps using concrete examples rather than vague critiques. Further, they should set achievable, measurable goals within a reasonable timeframe and clearly explain how success will be evaluated by the employer.

Just as important, a well‑designed PIP outlines the resources and guidance the employer will provide, such as regular check‑ins, training, and/or coaching. This point is especially critical, as it serves to reinforce that the goal is improvement rather than discipline. When expectations are transparent, support is genuine, and the process is consistently applied, an effective PIP is far more likely to be seen as a corrective tool rather than a precursor to termination.

The Walsh decision is a useful data point in what is becoming broader precedent. While Muldrow opened the door to more claims, it is clear that courts are still drawing lines around what qualifies as actionable conduct. Employers who keep their focus on those lines, particularly on whether a decision alters the terms or conditions of employment in a tangible way, will be in a stronger position to defend those decisions if challenged.