Want to use a Last Chance Agreement? Careful, it could be used against you.

Contributed by Michael Wong

While Last Chance Agreements (LCAs) have grown in popularity as a way to protect an employer’s decision to terminate an employee, the Central District of Illinois’s decision in EEOC v. Cognis has created a concern for employers that use LCAs.

In EEOC v. Cognis, the court issued a bold statement by granting the EEOC summary judgment and finding an employer, Cognis, had violated Title VII by terminating an employee after he revoked his promise to abide by an LCA. 

In the case, the employee was offered an LCA after his poor performance resulted in verbal warnings, counseling and a suspension. The LCA stated that “in lieu of termination,” the employee agreed to accept the terms of the LCA, including a release and waiver of any claims under state and federal employment law in relation to his right to employment with Cognis or his status under the LCA.  The employee understood that if he did not agree with all of the LCA terms, including the release and waiver, he would be immediately terminated.

After signing the LCA, the employee questioned whether he had waived his civil rights, including his ability to file an EEOC charge of discrimination.  Cognis’ response was simply that it would not alter the LCA.  Cognis did not explain if, or how, the LCA impacted the employee’s civil rights or ability to file a charge of discrimination. After learning that the LCA would not be modified, the employee revoked the LCA indicating that he refused to give up his civil rights.  Cognis then terminated the employee because he was unwilling to remain bound by the terms of the LCA.

In granting summary judgment against the employer, the court held that the employee’s revocation of the LCA was a protected activity and the employer’s decision to terminate his employment after the revocation (even though the employer was simply reverting to its prior decision to terminate the employee) constituted an adverse employment action, because it “might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” While the court refused to apply the same rational to the EEOC’s class claims, it specifically stated that it “believes that a jury could reasonably conclude that Cognis feared protected activity from poorly performing employees if they were terminated, and therefore offered LCAs which required the poorly performing employees to give up their civil rights as their sole alternative to termination.” 

Employers should carefully review their last chance agreements to determine whether they could fall into the same pitfall as Cognis. Revising the language of a last chance agreement to clarify an employee’s rights may provide some protection from the Central District’s decision. Regardless, employers should now be more careful when terminating an employee who refuses to sign or wants to revoke his or her promise to abide by a last chance agreement.