Last Chance Agreement Can't Waive Future Claims

The Sixth Circuit Court of Appeals, in  Hamilton v. General Electric, issued a very interesting employee rights decision this month that can be helpful to both employees (and their lawyers) and instructive to their employers.

Jarret Hamilton worked for General Electric for over 30 years.  He had a relatively clean record of employment until 2004 when things began to deteriorate.  Because one of the managers was out to get him, according to Hamilton, he was written up several times which resulted in his termination.

After the termination, the union intervened and Hamilton, GE and the union signed a Last Chance Agreement.  A Last Chance Agreement  ("LCA") is often used in union settings in situations involving alcohol or drug abuse, misconduct consisting of harassment, absenteeism, or repeated violations of workplace rules. 

Last Chance Agreements work like this:

  1. the employee engages in some misconduct;
  2. the union negotiates the LCA with the employer on behalf of the employee;
  3. an agreement  is entered into which gives the the employee his job back and
  4. contains language specifying that if the employee violates any part of the agreement, the employee will be immediately fired  (and this time it's for good) 

In Hamilton's agreement, Hamilton got his job back on the condition that he would comply with all of GE's rules. If any of the rules were violated, Hamilton would be subject to immediate termination.

Hamilton's agreement also contained a provision which said that if GE did terminate him, Hamilton agreed that no legal action regarding the discharge would be filed.  Hamilton signed the agreement and he went back to work.

Everything was fine for about a year and then other incidents occurred which led to Hamilton's suspension. Hamilton believed he was being discriminated against because of his age and filed a complaint of age discrimination with the EEOC as a result. When he returned to work after the suspension, and after the filing of the EEOC complaint, the harassment got much worse according to Hamilton's testimony, all of which culminated in his termination.

Hamilton filed a lawsuit in federal court in Kentucky. Not surprisingly, GE argued that Hamilton had "waived his right to proceed to court by signing the Last Chance Agreement."

While Last Chance Agreements are generally held to be binding on the parties, both the district court and the Sixth Circuit Court of Appeals determined that the provision in Hamilton's LCA which barred him from bringing a lawsuit to challenge the discharge was not enforceable. Finding in favor of Hamilton the court held:

We have held that '[i]t is the general rule in this circuit that an employee may not prospectively waive his or her rights under Title VII...Both of the cases GE cites hold that when an individual is faced with a known violation, he or she may be able to waive his or her ability to pursue further legal actions relating to that past violation. Neither case, however, stands for the proposition that .. an employee can prospectively waive statutory claims relating to potential future violations.

Hamilton signed the LCA nearly a year before he was terminated, and the LCA does not represent his choice to forego future remedies based on GE's future statutory violations.  Accordingly, because Kentucky law does not dictate the contrary result, we conclude that Hamilton's LCA does not bar him from pursuing this legal actions.

In reversing the district court, the Sixth Circuit also allowed Hamilton to proceed on his retaliation claim.

Last Chance Agreements can help employees keep their jobs and have a useful purpose. This is  particularly true in cases of alcoholism and substance abuse when employees are given a chance to get treatment and come back to work. LCA's were never intended to give employers a license discriminate. This case says that  language in LCA's which give employees their jobs back on the condition that they won't ever be able to sue for a wrongful discriminatory discharge will not be enforced.


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