Some employers use last chance agreements (“LCA”), particularly in union settings, to allow hourly employees “one last chance” to improve performance.  In return, the employee waives the right to use the union’s grievance and arbitration process if later termination is due to continued failure to improve performance or due to another policy violation.  Employers will explain that the employee otherwise would be terminated, but can remain employed in return for signing this “one last chance” agreement; if the employee fails to sign the LCA, the employee will be terminated for the underlying violation which led the employer to offer the LCA.

Some employers also require employees to release statutory civil rights in an LCA.  As an employer recently learned, this practice is hazardous and can lead to significant liability.

The EEOC won summary judgment against an employer who refused to modify an LCA by removing the civil rights waiver language.  An employee, Whitlow, signed the LCA.  A few days later he wanted to change his mind about restricting his civil rights in the LCA.  He asked the employer about making that change, and the employer refused to modify the LCA.  Based on that, Whitlow revoked the LCA.  Since he was not willing to remain bound by the LCA, Whitlow was fired.

In discussions with Whitlow about the LCA, the employer did not mention:

• That the waiver of his statutory civil rights in the LCA was not required (and the employer’s actions suggested otherwise);
• That the LCA did not keep him from filing an EEOC charge (and the LCA’s language appeared to keep him from doing so);
• That the LCA was releasing only past civil rights claims, not those in the future (and the language was not artful in making that distinction).

The EEOC filed suit on behalf of Whitlow, claiming retaliatory discharge, and on behalf of a class of other employees who had been offered (and signed) similar LCAs.  The EEOC argued that merely offering these LCAs with such waiver language was unlawful retaliation.

The Court granted the EEOC (and Whitlow) judgment as a matter of law on Whitlow’s individual claim.  It was apparent that the employer had terminated Whitlow when he refused to waive his civil rights.  As to the class claims, the Court ordered a trial.  The Court did rule, however, that the offer of such an LCA could be considered retaliatory.

Lessons to learn:

• LCAs can be effective tools but the more conservative (and arguably best) practice dictates that the waiver of statutory civil rights not be included in the LCA;
• If an employer wishes to include such waiver, the LCA (or the employer) should explain that
  • the employee is releasing only past claims, not future claims;
  • the employee can still file a charge with the EEOC but is waiving the to right to recover any personal benefits; and
  • the waiver of statutory civil rights is not mandatory and if that part of the LCA becomes the only basis for the employee’s objections, the employer is willing to carve out that requirement.