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.

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