What is a Last Chance Agreement?
Employees and employers agree to use last chance agreements for several reasons. Employers may wish to save face, avoid bad publicity, and to avoid having to re-hire for the same job if the employee violates the new policies or procedures. Employees may be looking for a way to keep their job, not stepping into the next step of employment opportunities that may have existed had the employee followed the rules and performed the job properly. Either way, the thought process is that both the employee and the employer may be able to walk away from the situation on positive terms—without further legal action .
A last chance agreement is evidence that the employee was given a chance to continue work, and that if the agreement was violated, the employer would be able to terminate the employee without additional discipline or follow up with regard to employee discipline policies and procedures. Essentially, the employee acknowledges that the situation will end when the last chance agreement is violated—even after receiving additional training, chances to improve performance, and/or other similar opportunities.
Essentials of a Last Chance Agreement
Many employers have not experienced a last chance agreement or even are aware of them. A last chance agreement is typically a written agreement entered into between the employer and an employee at or around the time of termination to allow the employee one final opportunity to correct his or her performance, attendance, or other workplace behavior. Failure to comply with the terms of the last chance agreement will typically result in immediate termination of the employee.
In the best of circumstances, the employee signs the last chance agreement voluntarily with the clear understanding of what is required of him or her going forward. In certain unions, this understanding and agreement maybe memorialized in a last chance settlement agreement. The model last chance settlement agreement provides that if the employee violates the term of the agreement, the union and the employer agree that disciplinary penalties of removal from the service are the appropriate discipline and that removal should be implemented. The last chance settlement agreement also provides that the union waives its right to grieve any such removal. Many public safety and other unions either oppose last chance settlement agreements or restrict them significantly through collective bargaining.
A last chance agreement should clearly set forth the misconduct or workplace behavior that is the basis for the agreement. It also should provide clear examples of the employee’s conduct that needs to change. The agreement should also set forth the duration of the agreement, the period during which the employee must exhibit satisfactory improvement. Further, the agreement should set forth the consequences of the employee’s failure to adhere to the terms and conditions of the agreement. Where possible, the employer should have the employee witness and/or acknowledge that he or she understands the terms and conditions of the agreement and the employee should make his or her own written statement expressing the employee’s understanding and willingness to comply with the terms and conditions of the agreement.
Last Chance Agreement: When and How to Use
There are circumstances in which an employer should consider entering into a Last Chance Agreement. The situation most typically occurs when an employee recently injured or otherwise impacted by the employer’s decision has returned to work. Several questions will help sort out if a Last Chance Agreement is appropriate. From the employer’s perspective, one question to review is the nature of the underlying employment issue that caused the return to work situation. Are there multiple prior violations of the same type (for example, an employee with multiple attendance violations)? This may not be a termination case for many employers, which may consider it appropriate to provide the employee another opportunity, but with more formal guidelines and direction than in the past. Another issue to consider is whether the injury to the employee was truly short in duration or whether there is a concern that by actually returning to work, the employer will re-experience the same issues. For example, one could envision a situation in a manufacturing facility where a machine operator is involved in two or three minor safety or environmental incidents in the year and is returned to work. The employer may wish to review whether a Last Chance Agreement is appropriate to put the employee on notice that any subsequent violations will not be tolerated.
From the employee’s perspective, the willingness to enter into a Last Chance Agreement may give the impression, or even be the case, that the employer is interested in the employee’s continued availability. He or she may view the employer as being flexible or understanding. One often overlooked benefit of the Last Chance Agreement is that it can serve as an opportunity for the employee to recommit to the employer without the fear of immediate discharge if the ultimate belief is that the employee is otherwise a good one that simply needs a nudge in a more positive direction.
Examples of situations where Last Chance Agreements may be appropriate often times involve attendance violations. If, for example, an employee with a known health issue returns to work after FMLA leave and has had multiple attendance issues either before or after the leave period concludes, it may be in the best interest of both the employer and the employee to have him or her enter into an agreement. From the employer’s perspective, the agreement will put the employee on clear notice that their attendance cannot continue to cause interruptions to the business. From the employee’s standpoint, the agreement is a way to make the employer aware of his or her medical situation while at the same time committing him or her to following the attendance policies going forward. Other examples would be where an employee has been disciplinary terminated and the employer reinstated him or her after a substantive review of the circumstances surrounding the termination. In that case, the employer has perhaps retained the employee’s services while the employee has received his or her job back upon meeting the terms and conditions articulated in the Last Chance Agreement.
Most union contracts will also contain language addressing the use of Last Chance Agreements during the grievance process. These agreements are almost always entered into voluntarily with the union and provide that no disputes or grievances will be filed over the interpretation or application of the agreement.
Legal Considerations and Requirements
Last chance agreements are generally enforceable as long as they meet certain requirements such as proper consideration, mutual agreement and compliance with various laws. However, the drafters of the federal Civil Rights Act of 1991 had something else in mind. That Act provides for a civil penalty against employers for requiring that employees release potential claims under Title VII of the Civil Rights Act of 1964 or any other provision of the Civil Rights Act of 1991. Yet, last chance agreements generally require the employee to waive all possible claims, including a waiver of his or her rights under the various laws prohibiting employment discrimination.
In addition to Title VII of the Civil Rights Act of 1964 (age discrimination), the Age Discrimination in Employment Act, the Fair Labor Standards Act , the Employee Retirement Income Security Act, the Family Medical Leave Act, and the Occupational Safety and Health Act are examples of laws that prohibit discrimination "on the basis of race, color, religion, sex or national origin."
At least four federal court decisions have considered whether the language of the Civil Rights Act of 1991 prohibits employers from requiring employees to enter into last chance agreements. All of them have held that in fact, the 1991 Act does not apply to last chance agreements. The reason for their conclusion is that the plain words of the statute make it applicable only to settlement agreements by which an employee releases "prospective" claims. Therefore, because the employees in these cases did not have a pending claim, the statute plainly does not apply.
Pros and Cons
Advantages of Last Chance Agreements
Last chance agreements can be beneficial to both employers and employees if used properly. From the employer’s perspective, last chance agreements can be an important tool to manage particular workplace issues in a consistent and uniform manner across the workforce. A last chance agreement can also be a relatively inexpensive and simple tool that an employer can use to correct an employee’s behavior. For example, if an employer has an employee who has attendance problems that result in termination under the employer’s absence policy, but the employee has worked for the employer for many years with a generally good performance record, and the employer believes that if the employee’s attendance issues do not continue the employee will return to being a productive employee, the employer might choose to enter into a last chance agreement with the employee.
By entering into the last chance agreement, the employer is making the employee aware that if the absence issue occurs again, the employment is terminated. In addition, if the employee’s manager signed the last chance agreement, it sends a message to the employee about how important the issue is to the employer. The agreement provides continuity within the workforce. The terms of the agreement apply equally to all employees regardless of race, color, religion, sex, national origin or other protected categories.
Last chance agreements also can benefit an employee who may have no employment prospects for the near future, such as in a niche industry, in a small community or an older employee. An employee who knows he or she may be unemployed for a considerable period of time may appreciate the opportunity to correct past misconduct and keep his or her job.
Disadvantages of Last Chance Agreements
However, there are also disadvantages to both parties to a last chance agreement. For employers, there can be a potential problem when the wrong employee is placed on a last chance agreement. Being placed on the agreement could be seen as a badge of dishonor or a "brand of disgrace." If an employee is placed on a last chance agreement when the employer did not strictly enforce its last chance agreement policy, the employee could be entitled to reinstatement with back pay and benefits. Last chance agreements are typically considered a form of discipline and if an employer fails to follow its standard procedures and policies when imposing the disciplinary last chance agreement on an employee, the employer could face liability for discrimination or wrongful termination, for example.
For employees, they might be asked to sign the last chance agreement without the benefit of being counselled by an attorney with experience in negotiating these agreements. Experienced counsel can help an employee avoid some of the pitfalls of last chance agreements.
Last Chance Agreement Case Examples
Last chance agreements can be a successful way to use discipline to eliminate specific behaviors, maintain control of an employee’s employment and satisfy your obligations under the ADA, ADAAA and FEHA, as illustrated in these three cases.
Swanson v. Gen. Motors Corp. The employer met its burden to establish that the purported discharge of an assembler who claimed his diabetes prevented him from feeding in slow-moving production lines was justified because his EEOC-challenged conduct of failing to feed cars on his production line had an adverse impact on production. The assembler failed to demonstrate that he could have met the employer’s expectations if given a reasonable accommodation. Summary judgment was affirmed. Mann v. Scott White Mem’l Hosp. The employee who was discharged from a hospital for failing to participate in drug testing following an accident in which he was driving a hospital vehicle while under the influence of methamphetamines failed to show that a "last chance agreement" which allowed him to return to work after three years of rehabilitation and sobriety since his removal from work in 2003 was somehow discriminatory . Because the employee was discharged for violating the employer’s previously accepted last change agreement contingent upon his continued treatment and participation in a professional health program, and the employer would have also terminated similarly situated disabled individuals who violated similar work rules, the Court granted summary judgment to the employer. City of Bellflower v. Payan. The City of Bellflower’s policies and procedures, including its procedures dealing with termination of employment, were enough to put employees on notice of the requisite procedures to be followed in terminating municipal employment. The employee received sufficient notice of the City’s procedures to be followed from the numerous documents prepared in connection with his own discharge (terminated a disabled employee for conduct that violated the premise of his employment as a member of the fire department). Summary judgment was affirmed.
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