Some HR pros have become afraid of entering into “last chance” agreements with poor-performing staffers. But as one workplace expert notes, those agreements can be legal and helpful — as long as they’re done the right way.

Tim Eavenson, writing on his blog Current Employment, helpfully defines what a “last chance” agreement is in a recent article:

“A Last Chance Agreement is a formal contract that is signed by the employee and a company representative, detailing specific issues that need to be remedied in specific ways, in order for the employee to keep his or her job.”

But it’s more than the last phase of a performance improvement plan. As Eavenson puts it, it’s a “take-it-or-leave-it opportunity: either sign this deal and get one more chance, or we’ll terminate you today.”

Like non-competes, performance improvement plans and a lot of contracts that HR gets involved with, though, there’s a major possibility problems will arise.

‘Waive your rights — or else’

A “last chance” agreement gone wrong occurred last summer when a federal judge ruled in a case involving Cognis Corp., which fired an employee who wouldn’t agree to waive his right to sue in federal court as part of a “last chance” pact.

Cognis required Steven Whitlow to sign a “last-chance” agreement that  prohibited him from filing a discrim­ination charge with the EEOC — even a  charge based on something that might occur in the future.

Whitlow refused. He was fired.

The Equal Employment Opportunity Commission sued Cognis on Whitlow’s behalf. In federal district court, the judge ruled Cognis stripped Whitlow of his rights to seek relief for discrimination or to file a charge with the EEOC — and illegally retaliated against Whitlow by letting him go.

The decision came in the form of summary judgment, a rarity in retaliation cases.

But the court held  that no jury could reasonably conclude that Cognis did not unlawfully retaliate against Whitlow when it fired him, and that Cognis’s argument to the contrary  “defies simple logic.”

The outcome: Cognis recently settled the case for a whopping $500,000.

When ‘last chance’ agreements work

If there’s possibility that a last chance agreement might get a company sued and cost it $500,000, why would anyone even bother?

Eavenson says there’s most certainly a time and a place for “last chance” agreements, so long as companies do one thing:

Last Chance Agreements should not include any promises by the employee beyond their assurance that they will perform the tasks contained in the agreement to the satisfaction of management … No promises about forgoing pay increases, waiving time off, losing weight, whatever… An LCA has one purpose, and that is to give a problem employee an understanding of their job, and an out, if they can step up to the plate.

And as always, if you’re unsure if you’re “last chance” agreement will pass muster, it’s better to take it to an employment law attorney first rather than hear about its shortcomings in court.

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