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Following EEOC victory, carefully consider conditions you include in last-chance agreements

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in Discrimination and Harassment,Human Resources

In a significant legal victory, the EEOC has persuaded a federal court to limit what employers can in­­clude in so-called last-chance agreements.

The court concluded that the EEOC was right when it argued that agreements threatening retaliation are illegal and that employers can’t provide employees with an ultimatum to give up their right to sue in exchange for keeping their jobs despite poor performance.

Recent case: Steven Whitlow, a less-than-stellar performer, received several oral warnings and a disciplinary suspension before the Cognis Group insisted on a formal counseling session. Nothing worked.

But instead of outright terminating Whitlow, Cognis followed its usual practice: It offered him one last chance to improve his performance in lieu of immediate termination.

Cognis’ last-chance agreements are take-it-or-leave-it propositions. Cognis’ employees must agree that, for a full two years, they will meet every performance and attendance standard or face immediate termination.

In addition, employees agree to release the company from any liability and refrain from making any claim under “Title VII of the Civil Rights Act of 1964, and similar state or local fair employment practices law, regulation or ordinance ....” The agreements also ban claims invoking just about every other federal or state law protecting employees from discrimination.

Whitlow signed the agreement, but then had second thoughts about what he was giving up. He asked the company to modify the agreement to exclude the claims release. Cognis refused and Whitlow revoked his agreement. He was immediately terminated.

Whitlow went to the EEOC, which took up his cause. It found several other employees who had signed the same agreement and sued on their behalf.

In court, the EEOC argued that by making employees waive their rights to take their discrimination complaints to the EEOC or other agencies, the company was essentially giving employees who believed they had experienced discrimination just two choices:

  1. Go to the EEOC and lose their jobs.
  2. Give up their rights and keep their jobs.

Significantly, the agreement didn’t just require giving up past discrimination claims, but also future ones that might emerge during the two-year duration of the agreement.

The court viewed that as giving the employer carte blanche to discriminate—and as something that would persuade a reasonable employee from complaining about discrimination in the first place.

The court concluded that including the term in the last-chance agreement violated Title VII. (EEOC v. Cognis Corporation, No. 10-CV-2182, CD IL, 2011)

Final note: You may wonder how this is different from conditioning a severance payment on giving up the right to sue. The court explained the difference.

In a severance agreement, the em­­ployee has already been terminated. The only question is whether he wants to keep the right to sue or wants money in exchange for going away. Plus, the employee only gives up past discrimination claims.

Employees who sign a last-chance agreement, however, remain em­­ployed and agree to give up the right to sue for both past and future discrimination.

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