Quirky Question #245, Last chance agreements


We operate a manufacturing plant with a union workforce where new employees begin with a 90-day probationary period during which they are not yet members of the union. I recently hired a guy who refused to work overtime on several occasions, so I had him sign a “last chance” agreement in which he agreed that any further unexcused refusals would result in the termination of his employment. I also had him agree that he would not be able to grieve that termination because it would be based on his behavior that occurred during his non-union probationary period. As you could predict, last week after his probationary period ended and he joined the union, he refused to work overtime on Saturday. I plan to discharge him, but I’m worried that he’ll still grieve the discharge through the union and win his job back. What’s your advice?

Answer: By Joel O’Malley and Ryan Mick

Joe O'Malley

Joe O’Malley

Ryan Mick

Ryan Mick

It sounds like you have two competing concerns here: ensuring employees believe a “last chance” agreement actually is the last chance, and avoiding the unpredictability of the grievance arbitration process. Perhaps we can find a middle way.

As you appear to understand, a last chance agreement typically is a contract signed by an employee listing certain performance issues that must be fixed or maintained. If the employee refuses to sign, he is fired immediately. If he does sign and adheres to the agreement, he gets a chance to stay employed. Often, last chance agreements are used with respect to unionized employees to help ensure the employer will have a strong case if the eventual termination is grieved. Last chance agreements are generally legal and can be very useful, if properly drafted.

An improper last chance agreement – like any agreement in the employment context – has the potential to cause more headaches than benefits. For example, recently a court ruled that a company requiring its employee to sign a last chance agreement that waived his right to file a discrimination charge with the Equal Employment Opportunity Commission, even for future events, violated the employee’s rights. When the employee refused to sign, he was fired. The EEOC sued on the employee’s behalf, and the court concluded that the employer wrongfully retaliated against the employee when it terminated his employment.

In another recent case, a court held an employer had to arbitrate the factual guilt of an employee subject to a last chance agreement, even though the agreement provided “neither the termination nor any issue of termination will be subject to the grievance and arbitration provisions of the collective bargaining agreement.” The court held the last chance agreement did not clearly waive the arbitrability of the employee’s guilt; rather, it waived only the arbitrability of the manner of discipline.

So, how should you draft your last chance agreement to avoid this type of issue, and other pitfalls?

First, an employee should be asked to promise anything beyond an assurance to perform the actions in the last chance agreement. The employer should not ask the employee to forego a pay increase, waive some right to an employment benefit, or something else unrelated to work.

Second, if the employer seeks to avoid arbitration over any part of an adverse employment action that may result from the employee’s failure to comply with the last chance agreement, then the agreement should address arbitrability over all aspects of the employer’s decision – including both the issue of guilt and the issue of type of discipline. The employer should carefully review the language in the collective bargaining agreement’s grievance rules to ensure all issues are covered.

Third, when the last chance agreement involves an employee’s substance abuse problem, consideration must be given to the employee’s rights under the Americans with Disabilities Act and similar state laws which prohibit discrimination and retaliation against qualified employees with disabilities. While the current use of illegal drugs is not a disability and may be the subject of a last chance agreement, alcoholism and drug addiction can be disabilities under the ADA. In one case, a court has held that forcing an employee to sign a last chance agreement after the employer learned the employee was seeking treatment for a substance abuse addiction violated the Americans with Disabilities Act, reasoning that requiring the employee to sign the last chance agreement was a disciplinary action taken on account of the employee’s protected status as a recovering addict (rather than unprotected current drug/alcohol use). Thus, a last chance agreement should not single out employees based on their status as addicts.  For more information on this issue, particularly for California employers, see Quirky Question #142.

Returning to your specific question, it certainly presents some parallels to the case I describe above about the employee being asked to waive his right to file an EEOC charge. Here, you asked your employee to waive his right to file a grievance with his union. I would not be surprised if, after you terminate his employment, he does still file a grievance. Since your dual goals are to put some force behind your last chance agreements but also avoid an unnecessary grievance with the union, it may be best to issue some discipline at a lesser level that discharge – perhaps a three-day suspension – something you believe the union would accept.

Ryan Mick

For more than a decade, Ryan has counseled corporate clients and HR professionals on wage & hour issues; employee and independent contractor classification; hiring, discipline and termination; executive employment agreements; non-competition and other restrictive covenants; compensation plans; reductions in force; employee investigations; HR policies and M&A transactions. Ryan currently serves as Chair of Dorsey’s Labor and Employment group.

You may also like...