Does Your Last-Chance Agreement Contain A Prospective Waiver? It Probably Shouldn’t

As part of a progressive disciplinary process, we sometimes require employees to sign a document in which the employee acknowledges his past deficiencies and the fact that if his performance does not measurably improve, his employment will be terminated. (A “Last Chance Agreement”, because this is his last chance…..). There is nothing inherently illegal or wrong with an LCA, and they can be useful tools, both in an attempt to rehabilitate the employee and as proof that the employee was fully aware of the true reasons for his termination, if a termination occurs.

However, employers sometimes give in to the temptation to overreach in an LCA and include waivers of potential employment-related claims. That is precisely what got the Department of Veterans Affairs in hot water in Illinois a couple of months ago. The facts are as follows:

Mr. Lester, a sixty year old African American male worked for the Department of Veterans Affairs. Mr. Lester filed a race discrimination claim against the Department. As part of a mediated settlement, Mr. Lester was transferred to new location and required to sign an LCA. The LCA contained a provision that required Mr. Lester to waive all future claims that he may have against the Department. Shortly after his transfer the Department fired Mr. Lester. (Smells a little fishy?)

As one would expect, Mr. Lester sued the Department, claiming in part that the provision requiring the waiver of future claims constituted a materially adverse action that would dissuade a reasonable person from engaging in protected activity and, as such, constituted unlawful retaliation against Mr. Lester for filing a claim of discrimination against the Department. (The logic being-if a worker filed a claim of discrimination, the department would force you to either waive all future claims as part of the LCA or else be fired, thus reducing workers’ propensity to file complaints in the first place.)

The take-away from this case is:  We should be extremely cautious in presenting employees with waivers that require them to waive or release future claims or causes of action. When I say “extremely cautious,” I mean don’t do it. Waiving claims arising out of past conduct is probably OK, but waiving claims arising out of as-yet-to-occur, future conduct is probably not enforceable and may well give rise to a retaliation suit, as the Department of Veterans Affairs learned.

Did You Know That Louisiana Law Treats Employees and Independent Contractors Differently?

I was in state court this week, the 19th Judicial District to be precise, arguing an often-overlooked provision of our non-compete statute. The opposing party, let’s refer to them as “Overreaching, Money-Grubbying Bully” or OMGB for short, was attempting to enforce a non-compete agreement against my client, who we will call “Winner.” Specifically, OMGB claimed that my client was in violation of the agreement because he began to solicit customers of OMGB immediately after his services as an independent contractor had been terminated.

We argued successfully that while our non-compete statute allows an employer and employee to agree that an employee will not: 1) engage in business similar to that of her employer or 2) solicit customers of her employer after her employment ceases, on its face the statute only allows an independent contractor to agree that she will not: 1) engage in business similar to that of the party with whom she has contracted. The statute contains no language that would allow an independent contractor to be prevented from soliciting customers of the party with whom she has contracted.

In this instance, my client was not engaging in a competing business in any prohibited parishes, she was merely soliciting customers of the party with whom she had contracted. Although I believe that the difference in the language of the statute as it applies to employees and an independent contractors was due to legislative oversight (perish the thought) rather than intent, the difference is nonetheless there. So, if you are drafting a non-compete agreement between your company and an independent contractor, remember that while you can prohibit them from engaging in competition with you, you probably cannot prevent them from soliciting your employees.