June 7, 2012

Last-Chance Agreements — Employer beware!

The EEOC, in its recent press release (http://www.eeoc.gov/eeoc/newsroom/release/5-29-12.cfm) of May 29, 2012, announces a rare victory on summary judgment in what could be a bad trend for employers.  In the underlying case of EEOC v. Cognis Corporation, a foreign multinational corporation, the federal judge ruled that the company retaliated against an employee for refusing to waive his rights to file a discrimination charge, both for past conduct and prospective conduct. 

The employee, as a condition of continued employment, was asked to sign a last-chance agreement that prohibited him from filing a discrimination charge.  According to the EEOC, Cognis conditioned the employment on the execution of the last chance agreement and when the employee refused to be bound by that agreement he was fired.  As the Court noted in its opinion, it is not often that an employee is granted summary judgment on a Title VII retaliation claim. 

The outcome here is problematic for two reasons.  First, in most cases there is often a fact issue over the stated motivation for the adverse action taken by the employer because the motivation for the underlying decision is almost always in dispute; thus, there is a necessary question of fact that would defeat a summary judgment.  Second, the Court’s willingness to discount the fact that had the employee not executed the last-chance agreement in the first instance he would have been terminated for a legitimate and non-discriminatory reason – poor performance – is worrisome.  In rejecting Cognis’s argument on this point, the Court reasoned that even if it credited Cognis’s argument; it was the employee’s revocation of the last-chance agreement that constituted an adverse action, an act that might dissuade a reasonable worker from making or supporting a charge of discrimination.  (See Opinion).  This reasoning, of course, doesn’t adequately address the fact that the worker essentially was given consideration to remain employed under the last-change agreement.

What is clear from the Court holding in Cognis is the fact that the last-chance agreement is said to have threatened termination for undertaking future protected activity, which the Court says satisfies one element of the prima facie case of retaliation – a preemptive retaliatory act.  Now, all that remains for the Court is a determination of damages.  If the Cognis last-chance agreement had not included this prospective provision, I wonder how the case would have turned.

This holding is sure to motivate the EEOC to seek out similar cases of this kind.  The EEOC concludes its release by indicating that “[f]iling  EEOC charges is a fundamental right of American employees, and this agency always  stands ready to protect that right.”  EEOC’s Chicago District Director John  Rowe further states, “This court’s opinion should cause employers to remember that seeking to dissuade employees from exercising that right is not only bad policy, it’s a violation of federal law which can give rise to very substantial liability.”

Despite the Court’s finding and the threats by the EEOC, this author maintains that narrowly crafted last-chance agreements are often useful to employers, both to ensure employees understand that future satisfactory performance is demanded and to give the employee fair opportunity to improve his/her conduct.

For more information contact Steven M. Gutierrez

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