Last Chance Agreements (“LCAs”) can be useful tools for employers faced with the difficult decision of whether to terminate an employment relationship. Available in both unionized and non-unionized contexts, LCAs give employers flexibility in responding to misconduct that has continued notwithstanding previous disciplinary measures.
For instance, LCAs are effective for dealing with misconduct such as chronic absenteeism or for imposing discipline on employees with disabilities such as drug and alcohol dependencies. Additionally, LCAs can be effective in addressing situations where an otherwise dedicated and valued employee uncharacteristically engages in a form of more serious misconduct. The LCA allows the employer to give the employee one last chance to correct his/her behaviour and refrain from engaging in the behaviour again, while acknowledging and preserving the training and resources invested in the employee.
LCA Pitfalls: Fatal Flaws
While LCAs are an indication that an employer is making efforts to maintain and repair an employment relationship, courts and arbitrators have set aside or refused to recognize LCAs in certain circumstances, such as for being implemented too early or for having unreasonable terms. The consequences of an unenforceable LCA include reinstatement of the employee and/or damages for wrongful dismissal.
A vital aspect of the legality of a last chance agreement is when in the discipline process it was implemented. If the LCA has been introduced too early in the disciplinary process, an employer may be unable to rely on the agreement to terminate with just cause should a further instance of misconduct occur. In Scott v. Canada, 2010 PSLRB 42, the employer imposed an LCA in response to an employee’s absenteeism. The arbitrator set aside the LCA, stating that the employer had not “carried out any disciplinary measures before the events that led to the last-chance agreement. The [employer] should not be allowed to use last-chance agreements instead of progressive discipline.” Employers should therefore consider the applicability of progressive discipline, particularly in the unionized context where such direction might itself come from a collective agreement, before automatically implementing an LCA.
Employers considering whether to enter into an LCA with an employee should review the employee’s disciplinary record, focusing on prior attempts by the employer to bring workplace issues to the employee’s attention and to modify his/her behaviour. The determination to be made is whether the employer has made reasonable attempts to correct the problem before implementing an LCA.
Additionally, employers need to consider whether the LCA contains terms that an arbitrator or court would consider reasonable. For example, if an employee is required by the LCA to meet standards higher than those to which other employees are held such terms of the LCA may be regarded as unreasonable. The employer will be held to a standard of deciding upon reasonable terms that are appropriate in the specific circumstances.
Finally, the LCA must contain a period of time during which the employee must meet its terms; and, indefinite LCAs will not meet the reasonableness test in the face of a legal challenge. LCAs spanning one or two years are common. Notably, the period of time an LCA is in place can exclude time during which the employee is absent from work on an approved leave. In Kingston General Hospital v. O.N.A., 2010 CarswellOnt 4066, the employer extended the term of the LCA due to the employee’s on-year absence on maternity leave, to give the employer a reasonable opportunity to assess compliance with the terms of the LCA. In that case, the union agreed to the extension, and the arbitrator did not interfere with the agreement.
Ultimately, the LCA can be a useful way for employers to ensure compliance with workplace rules or meet the duty to accommodate in cases of disability and still effectively impose discipline, while retaining valuable employees. When deciding whether to enter into an LCA with an employee who has engaged in misconduct, it is critical for employers to pay particular attention to the reasonableness of the timing, duration and terms of the LCA.
Written by Colin Galinski and Shana Wolch of Spectrum HR Law and posted with permission from Spectrum HR Law.
Contact Colin at: 604.630.2079 or cgalinski@spectrumhrlaw.com
Contact Shana at: 403.444.8106 or swolch@spectrumhrlaw.com