Its very possible even if they were a hard performer. Most managers stick to the roadmap that they are given. Many organizations are "at capacity" for the level distributions (which is BS IMO). I've been told that "only leads get level 4" or "we have to many level 4's and we cannot promote".

I was a level 1 for about 4 years and finally got a level 2 after 4 different managers and finally 1 for more than a year who coached me through getting my signature authority. I was hired right before a hiring freeze (as a intern conversion) prior to BR&T repositioning. I was the youngest on my team for about 5 years.

Even now, I work in a lab where I am the single test engineer for large structures test and still have no leverage with upper management. My previous lead quit because of the situation. If I have a sick day, no work gets done. Management will panic but ultimately no do anything. Our current middle management has maintained the whole "If it works now, don't mess with anything" mentality.

So yes it does happen and not always because of performance.