A lot of supervisors think one way to avoid charges of racial bias is simply not to criticize the work of black subordinates. Not only might that be a lousy personnel policy, but also the U.S. Court of Appeals in New Orleans has declared it is illegal.

It's a violation of the 1964 Civil Rights Act to use race to deny workers the opportunity to improve, the judges found, and having faults pointed out is an effective way to get better at the job.

The ruling in Vaughn v. Edel found the magistrate who heard the suit originally was wrong in finding a black lawyer's firing legal because it was based on her low productivity. The appellate judges said the low productivity could not be considered in isolation because the company did so little to help her improve.

What happened is spelled out with unusual clarity.

The trouble began two years before the lawyer's firing, when she came back to work after a maternity leave. Her department manager presented her with a memo complaining about her low productivity as a contract analyst and suggested it might stem from "excessive visiting by predominantly blacks in her office behind closed doors." The manager warned "she was allowing herself to become a black matriarch" in the company and the time she spent giving counsel to colleagues was interfering with her work.

The lawyer read the memo as an indicator of racial prejudice and complained to the corporate legal department. To try to cool the situation, the manger specifically told the lawyer's immediate supervisor not to have any confrontations with the woman. He even gave her satisfactory ratings in annual evaluations and minimal merit raises to keep the company from firing her and engendering equal employment opportunity litigation, he testified.

The matter came to a head when a company-wide cost-reduction program forced the contract analysis department to fire two workers and she was included as one of the two poorest performers.

Although the standard may appear objective, the New Orleans court found, it is "infected" by the lack of help she got and that lack of criticism and counsel is directly related to race: a fear that fault-finding would be interpreted as bias.

In other cases, courts ruled:

Defense contractors have a lot of immunity from suits claiming that their products are defective. The U.S. District Court in New Haven threw out a wrongful death suit against the companies that designed, made and tested the Phalanx anti-missile system deployed on the frigate USS Stark. The reason: Trying the case would necessarily lead to the revelation of state secrets.

(Zuckerbraun v. General Dynamics, Dec. 5) It's sound underwriting practice for insurance companies to require an HIV test of applicants for some health insurance policies. For that reason, the New York Court of Appeals ruled, an order from the state insurance department barring such testing is invalid. Insurance companies argued the curb on testing is unconstitutional, but the state high court did not address that question.

The justices merely noted that asking information on whether a policyholder is a candidate for AIDS fits within the basic principles of the insurance business, and therefore the state regulator has no authority to issue the testing ban.

(Health Insurance Association v. Corcoran, Dec. 18)Moskowitz is a Washington editor with Business Week newsletters.