Call lawyer ASAP if your last-chance agreements require employees to give up Title VII rights
If you use last-chance agreements to encourage employees to improve instead of being fired, have your attorney review the terms.
The EEOC has just won a significant legal victory without even having to go to trial. It recently alleged that some last-chance agreements automatically violate Title VII if they prevent employees from filing EEOC actions. The agreements in question contained a clause that had employees promising not to file discrimination charges in exchange for keeping their jobs.
Recent case: Steven, an employee of the Cognis Corp. subsidiary of the multinational chemical company BASF, was allegedly a poor performer. In order to keep from being discharged, he signed a last-chance agreement in which he gave up his right to file discrimination charges then and in the future.
Steven then changed his mind about giving up his right to file discrimination charges. He told Cognis he no longer wished to abide by the last-chance agreement. The company fired him.
Cognis would later argue that the situation was as if Steven had never been offered the last chance. That is, Cognis said it did what it would have done earlier—it simply fired Steven for poor performance,
The EEOC took up the case on behalf of Steven and other employees who had signed similar agreements but hadn’t dared back out. It said the agreements essentially conditioned employment on giving up the right to make a federal employment discrimination complaint.
The court agreed with the EEOC and said it was clear Steven was fired in retaliation for engaging in protected activity—refusing to give up his right to sue for discrimination.
There will be no trial. All that’s left now is for the court to assess damages.
However, the court will still hold a trial for the other employees who signed the agreements and didn’t back out. The EEOC will have to show that convincing employees into signing the contract somehow amounted to violating Title VII. (EEOC v. Cognis, No. 10-CV-2182, CD IL, 2012)
Final note: In this case, Steven wasn’t saying that he necessarily had a discrimination claim. He was merely declaring that he shouldn’t be forced to give up the right to file an EEOC complaint just to keep his job.
Last-chance agreements: What employers should do now
Watch this case carefully. If the court follows up with a decision that last-chance agreements that include a promise not to sue are invalid, many employers will have to review their agreements carefully.
For now, it will be very risky to fire someone who refuses to sign a last-chance agreement that includes a promise not to sue. Check with your attorney before you terminate an employee who refuses to sign or who wants out of an existing agreement.
Finally, consider whether last-chance agreements are worth the potential trouble. If you are using them to avoid a potential lawsuit over discharging someone, rethink the strategy. A better approach might be to offer a small severance payment in exchange for a complete liability release.
Better yet, make sure your disciplinary system is fair and that any discharge will stand up in court.
