Last Chance Agreement Samples: A Complete Resource

What is a Last Chance Agreement?

When non-union employees are fired, it often becomes the lawyer’s determination about whether someone did something that justified the termination and, in unionized settings, it is often the union’s determination about whether the employer had just cause. This is not the position of non-union employers or the employee, however, who may face termination by the employer for their behaviour, as the employee doesn’t have any protections and the employees, sometimes rightfully, may be upset by it. These emotions are heightened when the employee has had a long period of service which resulted in the expectation that their relationship with the employer would be for life. Employers, however, sometimes get ahead of themselves by setting expectations of future employment that they are not necessarily willing to live up to. Enter, the last chance agreement.
As the name suggests, last chance agreements are a last opportunity for either the employer to enforce its policies and practices or for the employee to demonstrate that they can be a good employee if provided with another opportunity . The circumstances under which a LCA is suggested are often varied but essentially a LCA comes out where the employer and employee have reached an impasse on the expectations between them. As such, and as is often the case when lawyers advise on legal issues, this is where the skill of the lawyer comes in (and so many of you come see us!). It is our job to know the law, balance the needs of the client against the job security and legal rights of the employee and draft something that both parties can live with. While it seems easy, given the various options available to both the employer and employee to increase the contractual obligations of each, and knowing that neither party will like the outcome of the deal. It is often a challenge to find the balance between the parties and it is often the recommended solution when all other attempts by management to obtain buy-in from the employee have failed.

Key Terms/Elements of a Last Chance Agreement

A well-drafted last chance agreement will contain several key components. The agreement should be in writing and signed by the employee. The agreement usually contains the following 3 essential elements:

• Conditions of Employment: The last chance agreement will set out the employee’s obligations in order to retain his or her employment. It may include the employee’s obligation to adhere to the employer’s policies, or comply with safety or productivity standards. You should indicate that the employee has "received a copy of the policy" and had the opportunity to review it and ask any questions. If the employee is being required to complete an Employee Assistance Program or undergo counseling or therapy, the agreement might include language such as, "The employee agrees to follow all recommendations of the Employee Assistance Program and/or its providers."
• Consequences of Failing to Comply with Agreement: The last chance agreement should outline the consequences if the employee fails to fulfill the conditions of employment contained in the agreement. In some cases, it will allow for termination without notice should the employee fails to comply. It may also contain language advising the employee that he or she has no recourse to the grievance process if terminated for cause.
• Duration of the Last Chance Agreement: The last chance agreement should state the duration. How long will the employee be on "last chance status?" If the agreement does not specify duration and simply says that the employee will be on "last chance status", the employer may be stuck with that status for an indeterminate period of time. A last chance agreement that does not specify duration may serve as tacit acceptance of increased vulnerability to claims by the employee, and should not be entered into lightly.

Pros and Cons of Last Chance Agreements

Benefits to Employers
They help preserve relationships. Last chance agreements—particularly those that permit the employee to return to work under the terms of the agreement—and employer monitoring of the employee can be "teaching moments" that help teach the employee how to avoid the prohibited conduct. This is beneficial for the employer as it preserves the investment it has made in the employee’s training.
They help employers avoid expensive legal claims. Last chance agreements allow employers to set clearly defined expectations for the employee and to set out the consequences of the employee’s behavior. This type of clear communication helps deter "surprise" lawsuits, including claims of discrimination and retaliation.
They motivate employees. For many employees, getting a "second chance" is the best motivation to perform. Savvy employers communicate the message that they are willing to give the employee one more chance to meet the company’s expectations, but that there will be no additional opportunities to prove they have done so.
Drawbacks to Employers
They can be seen as lacking in trust. Employees may resist entering a last chance agreement; sometimes, the very idea of having to prove oneself in order to keep the job is demoralizing to the employee. Most employees prefer to know that they are trusted to perform their jobs and that mistakes will not be held against them.
They can expose the employer to lawsuits. A poorly drafted last chance agreement can provide the employee with a wide range of actions to rely upon in a lawsuit or arbitration. For example, the employee may allege that a discharge was not work-related, that the actions that resulted in discipline did not occur, or that even if they did, the employee was not responsible for them. Poor drafting places the employer in a weaker position in the lawsuit.
Benefits to Employees
They preserve jobs, preventing lengthy and expensive job searches. Savvy employees who are aware that they are likely to be discharged may be willing to negotiate the terms of their departure. Negotiating with the employer, rather than waiting to see if the employer will wait too long and discover that it is really time for the employee to go, is a much more controlled and less stressful process. It also allows the employee to retain a good reference from the employer, while protecting the employee’s defenses.
They can protect pay and benefits. The most common scenario at issue in last chance agreements is attendance. An employee who is not being fired (provided he meets the terms of the last chance agreement) need not check the "Laid Off" box on his job applications; an employee who is employed has access to health benefits. These is no guarantee that pay does not suffer, but if the back wages have been paid, the employee will generally retain some pay.
Drawbacks to Employees
They signal the end. Often, employers offer last chance agreements when they have already made up their minds to discharge the employee. In those cases, the offer is merely a way for the employer to make a terminated employee feel as though he or she has been given a tip. It may be demoralizing for the employee, who asks himself or herself, "Why does the employer even want me to stay?" Often, it would have been better for everyone to simply part ways at that moment.
They drive a wedge between employees and supervisors. Supervisors often resent having to go through the process of offering a last chance agreement, especially when they are opposed to the idea of keeping the employee. A supervisor who feels "forced" to offer a last chance agreement may harbor ill feelings toward the employee subject to the agreement. The manager may then be inclined to sabotage the employee’s efforts to meet the terms of the agreement.

Legal Issues and Compliance

Employers must ensure that the specific language used in the last chance agreement complies with relevant employment laws, particularly when the employee is a member of a protected class. An employee’s protected class status could be implicated if the employee can prove that their termination (in this case, under a last chance agreement) resulted from an unlawful employment action at the hands of their employer or supervisor. In other words, an employee may argue that the employer’s reason for discharging them violated federal, state, or local anti-discrimination laws or regulations on the basis of race, color, religion, gender, national origin, age, etc., as well as disability discrimination laws. Employers must be careful to ensure the language used in the last chance agreement is not susceptible to challenge on these bases.
The enforcement of last chance agreements is generally subject to state law rules and common law principles. Several rules apply. First, statutes of limitation customarily applicable to breach of contract actions should dictate claims arising based on allegations that an employee has not complied with the terms contained in the last chance agreement. For example, claims for breach of last chance agreements are commonly within New York’s six year statute of limitations. As such, employers should begin grievances regarding last chance agreements within that time period, and commence judicial action if necessary upon expiration of the statute of limitations. Second, for breach claims, courts will only consider whether the employee has violated the letter of the last chance agreement, and whether the employee was able to conform their conduct to its terms. Courts generally will not assess whether the employee was aware of the conduct constituting the alleged violation. Third, courts often will enforce last chance agreements provided they have been presented in "clear and specific" language. Courts will enforce last chance agreements if the conduct necessary to avoid discharge is defined "reasonably," meaning there must be a not unreasonable thought that the employee understood that the specific conduct to be avoided was explained in the agreement. Fourth, courts may be required to examine the validity of a last chance agreement where a disciplinary proceeding ensues between an employer and an employee. Such challenges are based on contentions that the last chance agreement is void due to public policy reasons.

How to Create a Last Chance Agreement

The first step in drafting an effective last chance agreement is to decide whether or not such an agreement is appropriate. Although there is no single answer, the burden is on the employer to show that a person’s conduct was severe enough to warrant a last chance. A last chance represents a genuine threat to terminate if the employee is not able to comport himself or herself in appropriate ways in the future, and at the same time, indicates that the employee must comply with the conditions set forth in the LCA or he or she will be terminated.
If you decide to draft a last chance, you should first consult your legal department or outside counsel for help in preparing an LCA . Your legal counsel likely has examples of LCAs, and other ERC members may as well. A sample LCA is not something that should be cut and pasted into a particular situation. For instance, if one employee has been absent from work for a particular period of time, and another employee is stealing money from the employer, the LCA conditions appropriate for the first employee would be different from the conditions appropriate for the second employee. Additionally, circumstances surrounding the end of an employee’s probationary period will not support a last chance for many employers, particularly since such a condition does not seem to represent a significant assurance to the employer that the employee will in fact change his or her conduct.

Examples/Samples

Last chance agreements are typically written in an official tone. Since they spell out the possibility of termination, they must be clear about the terms and consequences.
First example: THIS LAST CHANCE AGREEMENT (the "Agreement"), by and between (insert name of employee) (the "Employee") and (insert name of employer) (the "Employer") is made and entered into effective this ____ day of ___, 20__, (the "Effective Date"). WHEREAS, at the request of the Company, the Employee has agreed to enter into this Last Chance Agreement (the "Agreement"); and WHEREAS, having been made aware of the disciplinary action against the Employee, and having been made aware of the previous disciplinary action which has been taken against the Employee, the Employee understands that he/she has the right to request a hearing concerning this action, as well as the right to file an appeal, but he/she waives his/her right to seek any hearing, appeal, or any other such procedure in connection with the action to implement the Agreement. NOW THEREFORE, in consideration of the foregoing, the Employee agrees to all of the following terms and conditions: 1. The Employee shall comply with all of the Company’s attendance requirements, policies, rules, and regulations. 2. The Employee shall comply with the provisions of this Agreement. 3. The Employee voluntarily acknowledges and agrees that a disciplinary action has been taken against him/her, namely 4. The duration of this Last Chance Agreement is ___ months from the Effective Date. 5. This Last Chance Agreement is intended to be a final, binding and complete settlement of the matters described herein. No past or present Employee, representative, agent, or any other third party shall have any right to assert any claim, demand, or cause of action, or to claim any right to obtain any remedy against the Employer concerning this Last Chance Agreement, except as is set forth in this Agreement. 6. The Employee acknowledges that he/she has voluntarily and knowingly entered into this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original. This Agreement shall be governed by the laws of the State/territory of ___ and may be enforced in any state or federal court of competent jurisdiction. IN WITNESS WHEREOF, the parties have caused this last chance agreement to be executed by their duly authorized representatives effective as of the date first written above.
Second example: Active Date: This Agreement is entered into between (insert employer name) hereinafter referred to as the "Company" and (insert employee name), hereinafter referred to as the "Employee". A review has been conducted by (insert supervisor name), the (insert job title), concerning (insert employee name) tenure with the Company. An official review was conducted with the employee on (insert date) concerning a suspension for (insert date) under Company policy – (insert company policy name) and a recommendation for termination had been given. The employee has requested re-instatement with the Company for a final opportunity if he/she is to be employed in the future. (Insert supervisor name) has agreed, subject to the terms and conditions set forth in this Last Chance Agreement, to allow (insert employee name) one final opportunity for employment with the Company. The terms and conditions of re-employment are as follows: This Last Chance Agreement is entered into to not only be in the best interest of the Company and the employee, but also the customers. This Last Chance Agreement will remain in effect until (insert date). The agreement will be reviewed at that time by (insert supervisor) to determine whether or not the employee will continue with employment. IN WITNESS WHEREOF, the undersigned have hereto affixed their signatures this ___ day of ___, 20__.

Common Questions

Below, we’ve answered some of the frequently asked questions about last chance agreements.
Is a last chance agreement like a severance package?
No. A severance package is an offer of separation between you and the employer in exchange for something in return. A last chance agreement is much different. It’s an opportunity the employer gives to employees who are close to being terminated for violations of company policy but they are otherwise good employees. It’s a way to give the employee a fair warning, and a chance to improve their habits before they lose their job.
How long do you have to sign a last chance agreement?
Generally, you have between 14 and 30 days to review the agreement. However, many employers will set the deadline at 72 hours, so you should review the agreement and gain an understanding of its terms as soon as possible.
What happens if you don’t sign a last chance agreement?
If you don’t sign the last chance agreement , you may be terminated. The managing person has to sign to show he or she understands the agreement, but this is usually a simple formality. Most importantly, it’s the employee who signs it and agrees to the terms. If you don’t sign it, you’re essentially refusing the second chance.
What happens if you can’t meet the terms of the agreement set forth?
As long as you do your best to comply with the terms, you can’t be fired for failing to completely adhere to the agreement. That said, it’s important to follow the terms as closely as possible. Most employers will determine if you followed the agreement based on your actions, not your intentions.
Can you answer emails during any excursion for personal time away? (like a vacation)
Generally, most employers will say that your work duties supersede these excursions and that you should check your email regularly. If you are going to be away from your desk, even on a vacation, you should inform your employer and set a schedule for your response times.