Last-Chance Agreements: Expert Insights from Labor Arbitrators

By Janice Holdinski, Meeta Bass and Susan Bauman

Are you:

• An employer seeking guidance on disciplinary measures?
• An employee facing potential termination?
• An attorney interested in how arbitrators approach termination decisions involving last-chance agreements (LCAs) or seeking to be appointed as an arbitrator for an LCA arbitration?

Read on to learn labor arbitrators’ perspective on this crucial aspect of employment relations.

Employers often have concerns about terminating an employee, even when they feel the decision is justified by performance issues. Key concerns include properly documenting performance issues, ensuring the employee was notified of potential firing and considering the termination’s impact on the workforce. A last-chance agreement serves as protection against all of these concerns.

What is an LCA?

A last-chance agreement is a formal agreement between an employer, a union and an employee who has engaged in misconduct or has violated company policies. It typically offers the employee a final opportunity to correct their behavior and remain employed, usually under specific conditions outlined in the LCA.

Last-chance agreements have become an important tool for all parties to resolve issues and work towards a positive outcome. They can also provide employees with clear steps to improve their standing at work.

When Should an LCA be used?

The following are issues typically addressed in LCAs:

• Attendance
• Insubordination
• Workplace harassment
• Safety violations
• Substance abuse
• Violence or threats
• Prior disciplinary actions
• Procedural problems that exist in the employer’s case against the employee (witnesses, faulty investigation), which could include:
  • Unreliable or unavailable witnesses 
  • An investigator who may have a vested interest in the outcome
  • Failure to contact all potential witnesses

The Benefits of LCAs for Parties

Last-chance agreements reflect an employer’s commitment to investing in their workforce and helping to maintain a respectful workplace atmosphere. This can foster trust among all parties, which is essential for productivity. Last-chance agreements offer clarity, certainty and the potential to save time and money if a dispute arises.

Key Elements of LCAs

The language in an LCA must be clear, unambiguous, direct and specific. The last-chance agreement should include all agreed-upon terms and the consequences of failing to meet them. A last-chance agreement is negotiated by the union and the employer, with input from the affected employee, and should address the employer’s concerns. It must also be reasonable; for instance, a confidentiality clause may be included, but it shouldn’t be so restrictive that it unduly limits the employee’s legitimate activities. Key elements of an LCA include:

• Clear conditions
• Defined consequences
• Reasonable timeframe
• Support and resources
• Monitoring and evaluation
• Signatures and acknowledgment

From the Arbitrator’s Perspective

It is crucial to remember that the arbitrator knows only what parties communicate during the hearing.

What Parties Should Communicate to the Arbitrator:

• The employee’s history
• A thorough explanation of how the LCA was established, including any relevant conversations that led to the negotiations
• Detailed terms of the LCA, including the scope of the arbitrator’s authority
• Facts proving, or disproving, the employee’s offense and its connection to the LCA
• The employer’s enforcement of this and other LCAs

Issues the Arbitrator Will Weigh and Decide

• Is there an applicable, enforceable LCA? An arbitrator must determine if the LCA meets the criteria of a valid contract, including intent, offer, acceptance, consideration, legality and mutual assent. If an arbitrator deems the LCA a valid contract, the arbitrator generally must uphold its terms as negotiated between an employer, the employee and, where applicable, the union representing the employee.
   
• Has the employee violated conditions of the LCA? This is both a factual and interpretative issue. The burden is on the employer to prove that the employee violated the terms of the LCA, which often involves demonstrating a breach of company policies, rules or regulations. If the LCA does not explicitly state that violations of company rules constitute a breach, the arbitrator must determine if the employee’s alleged behavior qualifies as a violation of the LCA.
   
• Does the LCA preclude an arbitrator from considering just cause? Typically, a just cause standard applies in disciplinary cases. However, if the LCA explicitly states that the employer only needs to prove a violation of the LCA itself, then just cause is not relevant. It is best practice for the parties to specify whether the employee’s right to a just cause standard is waived in the event of a violation of an LCA.
   
• Can an arbitrator impose an LCA as part of a remedy in an arbitration for wrongful discipline? Arbitrators have broad authority to craft remedies for wrongful discipline but must adhere to the terms of the negotiated agreement. Although arbitrators can consider LCAs as a compromise solution, the key issue is whether they should impose an LCA. Typically, collective bargaining agreement includes language stating that arbitrators cannot add to, subtract from or modify the terms of the agreement. As an LCA may alter the negotiated agreement, arbitrators generally do not impose LCAs as a remedy.
   
• When might the LCA not be considered the “last chance”? An LCA is intended as the final opportunity for an employee to correct their behavior before termination, serving as a last warning. However, if an employer does not strictly enforce the terms of the LCA, the employee may perceive leniency or a lack of serious oversight. This perception can undermine the urgency of the LCA’s consequences leading to arguments that the agreement should not be enforced and potentially granting the employee with an additional chance. 

Arbitrators generally disapprove of LCAs that lack a clear end point. Like other disciplinary measures, an LCA is designed to correct behavior, and its duration should be proportional to the issues that prompted the discipline. Typically, an LCA should include a defined endpoint that provides a reasonable timeframe for an employee to improve their behavior and comply with company rules.

Additionally, arbitrators closely examine the role of a union representative in the LCA process, when applicable. The representative's signature on the LCA lends credibility to the agreement and ensures that the employee's rights were protected during negotiations. Arbitrators may scrutinize interactions with union members to prevent employers from circumventing the union, which is the exclusive bargaining representative.