Last Chance Agreement Definition
What is a Last Chance Agreement?
When an employee makes the mistake of violating a policy, a Last Chance Agreement ("LCA") can be an opportunity for the employee to redeem themselves. LCAs are legally binding documents that set the guidelines for reinstating an employee and outline the conditions of their potential reemployement.
Typically, employers use a last chance agreement to afford an employee with a second chance after a first offense. By giving an employee a last chance at keeping employment, both sides can come to an agreement on the expected behavior for the employee moving forward . If the employee complies with the terms of the agreement, it is likely the employee will be retained for a second chance at success. However, if the employee fails to meet the requirements of the LCA, it is grounds for immediate termination.
With both parties in agreement, an LCA provides a clear understanding of the rules, expectations, and possible limitations in rehire agreements. Exceeding these expectations or violating LCA terms are grounds for dismissal.
Last Chance Agreement Template Essential Elements
When drafting a last chance agreement template, employers must include several key components that are indispensable for the agreement to achieve its intended functionality. First and foremost, the agreement must clearly state the terms and conditions of the employee’s employment. If the employee’s presence at work is contingent on the completion of a rehabilitation program, the agreement should also explicitly address the issue of remediation and whether or not the employer will provide the time and/or resources for the employee to do so. ~[I]t is critical for an employer to ensure the employee understands his or her obligations under the agreement. Similarly, the consequences of the employee’s failure to comply with the terms and conditions of the last chance agreement should be fully stated. Not only will this benefit the employee by helping to eliminate any future confusion over the parameters of the agreement, it may also help the employer by avoiding the delusion that the employee has done what was required to retain his or her employment when the employee has not. In addition to outlining the terms and consequences of non-compliance, the last chance agreement template should also address who qualifies as a third-party arbiter. In other words, the agreement should state that any disputes will be referred to an impartial third-party arbiter, and the process for defining what constitutes an "impartial" third-party. Finally, it is critical for an employer to ensure the employee understands his or her obligations under the agreement. Providing the employee with the opportunity to ask questions about the terms, or helping to explain any vague or convoluted wording, may be beneficial to both parties. The fact that an employee signed a last chance agreement may not necessarily mean he or she read it, and if you’re not sufficiently cautious, this may create a problem down the line.
Breaking Down the Legal Impact of a Last Chance Agreement
The significance of a last chance agreement is a heavily contested topic. Some employers use them strictly as a way to try to motivate an otherwise disheartened employee, and some will use them as a chance to have the employee sign an agreement that contains a broad release of claims against the employer. Sometimes an employer will use a last chance agreement to "cover the bases" from a strategic standpoint so that they can later argue that the employee was terminated for cause (i.e. for violating the terms of the last chance agreement) and try to bar unemployment benefits or other claims.
From a litigation standpoint, the significance of a last chance agreement will depend heavily on the language of the agreement. If the agreement is construed to be a contract, then a violation of the agreement may result in a breach of contract claim. On the other hand, if the last chance agreement is not considered to be a contract, or if the language of the contract is written poorly, then the agreement may not have any legal significance beyond the employment at will doctrine.
It is important to remember that other legal issues may be presented by the use of a last chance agreement, including:
Keep in mind that many judges in the United States believe that last chance agreements, no matter how poorly written, are valid not only because they promote the complicated and confusing notion of employment at will, but also because employees should be held to what they sign.
How to Build an Effective Last Chance Agreement
Drafting a last chance agreement requires a careful step-by-step process, beginning with a clear understanding of the circumstances that led to its proposed implementation. The following steps will help assure that your last chance agreement inspires confidence and accomplishes its intended purpose:
- Identify the set of facts that have caused you to conclude that the employee is at risk of disciplinary termination.
- As you draft the last chance agreement, refer to your findings from step one.
- If you are proposing to implement the agreement in connection with a rescission of a disciplinary termination and reinstatement of the employee, consider whether the last chance agreement should be offered after the employee has returned to work (that is, after a new hire is made to permanently replace the terminated employee) or whether it is preferable to offer the agreement in advance of the employee’s return. Think carefully about the pros and cons of both approaches and your rationale.
- Ask yourself whether the accompanying adverse employment action (if any) is justified and whether it is better enforced through implementation of the last chance agreement or some other means.
- Your last chance agreement should provide for a period of enhanced scrutiny of the employee’s conduct, setting forth the specific terms of that enhanced scrutiny, including the type of monitoring and the duration of this additional oversight.
- Be skilled and specific when describing the particular conduct that the employee will be prohibited from engaging in, as well as any other conduct that may be considered incompatible with continued employment.
- Consider whether your last chance agreement should expressly indicate what difficulty may be expected if it is either not signed by the employee or is signed but interfered with. Make sure that both an "unsigned" and "signed but interfered with" scenario are addressed, and indicate whether such action will result in immediate disciplinary termination.
- Require the employee to acknowledge that he or she has had a reasonable opportunity to consult with an attorney concerning the employee’s agreement to sign the document.
Remember that every last chance agreement should be tailored to the particular circumstances. Accordingly, the above steps only present a general guide through the maze of drafting an appropriate last chance agreement.
Top Mistakes and How to Avoid Them
Even though it seems simple, some employers make mistakes with their last chance agreement templates. Here are some of the more common issues I see:
- Breach of agreement. Who is going to manage the return-to-work and ensure compliance with the agreement? Is there a clear process in place for documenting performance concerns or violations? Employers sometimes believe it is enough to have a last chance agreement template to rely on if a termination occurs. Even if you have a proper last chance agreement template, there must still be a process for monitoring the employee’s conduct after the agreement is signed.
- Specificity. A last chance agreement should be specific regarding what will happen if the employee violates it. If the agreement says that the employee will be discharged if he or she fails to report to work by a certain time, and the employee reports to work 10 minutes late on one occasion, it needs to be clear whether that constitutes a dischargeable offense . The greater the potential economic impact of a discharge, the more specific the terms of the last chance agreement should be regarding the consequences of a future violation. Also, if the last chance agreement requires the employee to meet certain deadlines, periodically re-visit the terms of the agreement with the employee to verify that he or she has satisfied the requirements.
- Language. Vague and ambiguous language in a last chance agreement can make it harder to enforce. Common problems I see include failure to define terms, failure to specifically define performance improvements, conflicting information in the agreement, and vague wording that leaves too much discretion in the hands of the employer.
When in doubt, solicit help from professionals to draft or re-write your last chance agreement. An experienced attorney dedicated to labor and employment law is the best resource if the agreement is disputed.
Last Chance Agreement Template Example
While every case is unique and will require company specific goals to be addressed, the following elements are included in a last chance agreement:
LAST CHANCE AGREEMENT
By and Between
(Employer)
And
(Employee)
Dated:
THIS AGREEMENT, is entered into by and between (Employer) hereinafter referred to as "Company," and (Employee) hereinafter referred to as "Employee."
Purpose
The purpose of this Last Chance Agreement is to consider the issue of continued employment on the part of the Employee under the circumstances set forth below.
THE PARTIES AGREE AS FOLLOWS:
- The purpose of this Last Chance Employment Agreement is to provide the Employee with a final opportunity to improve his/her performance and conduct.
- Employee acknowledges that he/she has violated established Company rules, policies and rules and acknowledges past disciplinary action. Specifically, on or about __________, Employee was _________ for violations of the Company’s _______ policies and rules.
- If Employee fails to comply with the terms and conditions set forth in this Last Chance Agreement and is found to have violated any company policy (including, but not limited to, attendance, punctuality, work performance, and/or any other misconduct), then Employee may be terminated without recourse or right of appeal and without having any grievance procedure available. It is understood by Employee that this action by the Company will not be grievable or subject to appeal or any other type of review procedure whatsoever because it is specifically understood to be a disciplinary termination.
- Employee is allowed additional time to adequately complete and meet expectations with regard to the above behavior. Violation of such expectations will constitute a termination for unsatisfactory work performance, misconduct and/or attendance or punctuality. Those expectations are:
- These standards will continue to apply until such time that Employee’s employment is terminated by this Last Chance Agreement or by further action by _____.
- An extension of this Last Chance Agreement may be granted in the sole discretion of ___ upon written request from the Employee.
- The parties agree that, upon the voluntary termination of the Employee’s employment, the Company shall not provide any employment reference verifying to any third person, including, without limitation, background screening services, employers and recruiters or other hiring entities, that the Employee worked at the Company unless said verification contains a specific statement that the Employee voluntarily terminated his/her employment with the Company.
In consideration of the foregoing, the Employee and the Company hereby agree to the terms of this Last Chance Agreement.
Dated: _______________________ (Employee)
Dated: _______________________ (Employer)
Common Last Chance Agreement FAQs
Frequently Asked Questions About Last Chance Agreements
What is a Last Chance Agreement?
Last chance agreements are often referred to as LCAs. An LCA is offered to an employee who has already engaged in misconduct, but the employer believes it worth the risk of trying to rehabilitate the employee instead of terminating employment. In addition, an LCA is also often used when the employee is about to engage in only minor misconduct that the employer believes could cause termination, or after a series of smaller misconducts. An LCA can also be offered in the face of serious misconduct based upon the employee’s history or other circumstances unique to the situation. Further, in union matters, an LCA is also often offered for the purpose of capturing an agreement to end all litigation relating to the employment.
How does an LCA get enforced?
The key is in the clear language of the LCA to define the terms and the promise. The analysis and language needed will vary based upon the needs of the client, and the situation. But the bottom line is that the promise is only as good as the payment for consideration. In other words, the reward for rehabilitation, or avoiding termination, or capturing the merits and damages, must be clear and understandable. This clarity is needed because of the next question and answer.
How do you prove that someone violated an LCA?
Therein lies the rub. Like any contract case, the enforcement hinges on the intent of the parties when the final agreement was signed. This means that if the parties sign the LCA without understanding its terms, or if the LCA is misused, or if the LCA is signed when the employee really was still clear of any affirmative obligation, then it might become hard to enforce . Last chance agreements should be made clear at the start of the discipline process. If the LCA becomes an option at the end, then the parties’ expectations may be skewed, and therefore the enforceability of the LCA might be affected. On the other hand, where there is a mutual understanding and no coercion, the case law has enforced the LCA by granting summary judgment.
Does a Last Chance Agreement have to be in writing?
Generally, yes. The federal courts have sided with the EEOC in finding that an oral last chance agreement is too much of an alteration of the accused’s hearing rights. "Taking into account the case-by-case nature of the analysis, we believe that the best result here is for us to endorse what seems the clear intent of the legislative and judicial history: a last-chance agreement offered to terminate the proceedings before an administrative law judge must be in writing." U.S. E.E.O.C. v. United Parcel Service, Inc., 424 F.3d 1060, 1067 (11th Cir. 2005).
Can a Last Chance Agreement be used in a non-union setting?
Yes. While it is common and normal to see LCAs in union settings, they are broadly acceptable in non-union settings, and can be very effective. However, one caution, the case law indicates that, absent bargaining with an individual, a LCA in a non-union workplace cannot extinguish discrimination claims. EEOC v. Rite Aid Hdqtrs. Corp., 270 F. Supp. 3d 336, 337 (E.D.N.Y. 2017) ("an employee cannot waive the prosecution of (and the EEOC cannot settle) a private right of action held under Title VII.").