The 'Last Chance Agreement'

Coping with employee drug and alcohol abuse, and its inevitably harmful effects on the workplace, remains a significant problem facing employers today. According to the U.S. Department of Labor (DOL), more than 14 million Americans use illegal drugs. The numbers for alcohol abuse are equally staggering, with more than 12 million Americans classified as heavy drinkers. See www.dol.gov/asp/programs/drugs/workingpartners/stats. According to the DOL, “most individuals who abuse alcohol and other drugs are employed,” and, as any manager or human resources professional can attest, “when they arrive for work, they don't leave their problems outside the door.” Id.

As if dealing with the impact of drugs and alcohol abuse in the workplace were not difficult enough, a plethora of federal, state and sometimes local laws are implicated. The Drug Free Workplace Act, 41 U.S.C. '701, et seq., requires certain federal contractors to maintain a drug-free workplace and establish a drug-free awareness program. Under the Americans with Disabilities Act (ADA), 42 U.S.C. '12101, et seq. , a drug addict who is not “currently” using illegal drugs (although what “currently” means is unclear) and an alcoholic may be considered disabled and therefore protected against discrimination based on their condition. Under the Family and Medical Leave Act (FMLA), 29 U.S.C. '2601, et seq., drug addiction or alcoholism might qualify as a “serious health condition” triggering application of the FMLA leave entitlement provisions. On top of this, a whole host of state and local laws analogous to the ADA and FMLA might apply.

Beyond navigating these often complex and overlapping laws, an employer might be reluctant to lose a valued employee who may be going through a difficult time and who, with appropriate support and assistance, could again become a useful contributor to the organization. Yet, employers cannot ignore the potential consequences of tolerating the effects of drug and alcohol abuse in the workplace. So the question becomes: How can an employer protect its workplace from the often harmful effects of employee drug and alcohol abuse, avoid accusations that it is discriminating against an employee because of a purported addiction disability, and, at the same time, help an employee who was once a valuable and productive contributor to become so again? The answer may lie in a carefully crafted “Last Chance Agreement.”

Last Chance Agreements developed in unionized settings, but more recently have been used successfully by non-union employers to manage employees with demonstrated or admitted drug or alcohol problems. The premise on which every Last Chance Agreement is based is that the employee has committed some sort of offense, or his or her performance has deteriorated to such a degree, that, in the employer's view, termination is justified. For example, a employee may have come to work under the influence of drugs or alcohol, missed a critical meeting, not shown up for work, or exhibited a pattern of excessive absenteeism, hostile behavior or carelessness ' all attributable to a chemical dependency issue or alcohol abuse. It is not at all unusual for the employee to first disclose, or admit to, the existence of a drug or alcohol problem during a disciplinary meeting where it becomes obvious that the employee's job is in serious jeopardy. The employer agrees not to fire the employee, but only if the employee abides by very specific conditions necessary in order to keep his or her job. These conditions are spelled out in a Last Chance Agreement, and the employee's violation of any of its terms will result in immediate termination (although the agreement could provide for lesser consequences resulting from lesser violations).

A Last Chance Agreement can serve as an effective catalyst for an employee's recovery ' possible loss of employment can be a powerful incentive. Nevertheless, it is unfortunately inevitable that some employees will violate the terms of their Last Chance Agreement and will be fired. It is also inevitable that some of these terminated employees will sue their former employers, arguing that their termination was discriminatory, and that the Last Chance Agreement was not valid or itself an act of discrimination. Courts, however, have routinely rejected such challenges.

Applying general contract principles, courts have concluded that a termination based on a violation of a Last Chance Agreement is not tantamount to discrimination, but rather the result of a breach of contract, and that such a termination is entirely legal and appropriate because it was a clearly stated consequence of a violation of any of its terms by the employee. See, eg, Mararri v. WCI Steel, Inc., 130 F.3d 1180, 1181-85 (6th Cir. 1997); Longen v. Waterous Co., 347 F.3d 685, 688-89 (8th Cir. 2003); Fuller v. Frank, 916 F.2d 558, 561-62 (9th Cir. 1997); Mayo v. Columbia University, 2003 WL 1824628, 5-6 (S.D.N.Y. 2003). Indeed, many courts have recognized that Last Chance Agreements can themselves satisfy an employer's “reasonable accommodation” obligation under the ADA and analogous disability discrimination laws. See, eg, McKey v. Occidental Chemical Corp., 956 F. Supp. 1313, 1319 (S.D. Tex. 1997); Goldson-El v. Runyon, 812 F. Supp. 558, 561 (E.D. Pa. 1993).

What to Include

What conditions should be included in a Last Chance Agreement? As a threshold matter, employers should be mindful that the terms should be reasonable in scope and related to the employer's legitimate concerns for maintaining a workplace free of the effects of drug or alcohol abuse. Like any contract, a court might not enforce a Last Chance Agreement it considered to be unconscionable or the result of overreaching. See, Mararri at 1184 (upholding Last Chance Agreement absent evidence of overreaching or exploitation). Beyond this general requirement, however, the particular terms of a Last Chance Agreement will depend on the particular circumstances presented, with more stringent conditions logically placed on an employee in a position of greater responsibility, one which has safety implications, or on an employee who committed a particularly serious infraction on the job.

There are, of course, some general elements that should always be considered when drafting a Last Chance Agreement.

The Agreement should recite that, based on the employee's conduct (eg, a positive drug test result, an incident of intoxication, repeated failures to show up for scheduled meetings), the employer has concluded that it has grounds to fire the employee, but is prepared not to do so if the employee agrees to abide by the terms of the agreement. This is a critical requirement because it establishes that there is consideration for the employee's agreement – the employer has given up the right to immediately terminate the employee in exchange for the employee's commitment to the terms of the agreement. See Mararri at 1183.

A clear description of precisely what is required of the employee under the terms of the agreement. Again, this must be tailored to the particular situation, but typical provisions include:

• Documented successful completion of a substance (or alcohol) abuse treatment program (in-patient or out-patient) prior to return to work. Many health plans, in fact, pay for all or a portion of the costs of these programs.
• Enrollment in an after-care program (or participation in an Employee Assistance Program) after returning to work, and documented evidence of continued compliance with program requirements.
• Agreement by the employee to authorize the release of treatment information directly from the treatment program in which he or she is enrolled to the employer to confirm compliance.
• Submission to random (or regular) drug or alcohol testing, with the explicit understanding that any positive result will be deemed a violation of the Last Chance Agreement.
• Conformity with all workplace-conduct rules (which may be important where an employee has displayed uncooperative or hostile behavior).
• Compliance with regular attendance requirements of the job (subject, of course, to the requirements of the FMLA).
• An explicit statement that the employee acknowledges that a violation of any of the terms of the Last Chance Agreement will be grounds for immediate termination.
• The time period during which the Last Chance Agreement will remain in effect. In some Last Chance Agreements, it will be appropriate to have the agreement extend for a longer time period (perhaps several years). It may also make sense to have certain conditions expire on certain milestone dates, so that as the employee exhibits sustained compliance, compliance becomes less onerous.
• As with any contract, and especially with contracts between employer and employee, the Last Chance Agreement should be written in clear and precise language, and without “legalese,” so that the typical employee can understand exactly what is required of him or her, and the consequences of non-compliance.

Other Uses?

One of the as yet untested areas of the law involving Last Chance Agreements is the extent to which they can be effectively utilized beyond the context of drug and alcohol abuse. One logical extension would be to situations involving employees with mental disabilities who have committed some act of misconduct, or exhibited deteriorating performance attributable to a mental disability. In those cases where treatment or medication will likely have a positive effect on the employee's ability to function in the workplace (as is often the case with conditions such as depression and bi-polar disorder), a Last Chance Agreement might be an effective means of retaining a previously valuable employee, but at the same time putting in place safeguards to insure that the employee's mental condition does not again have a deleterious impact on the workplace. Obviously, with mental conditions the requirements in the Last Chance Agreement will be different from that applicable in the case of drugs and alcohol (and could include such things as completion of an in-patient program before returning to work, regular attendance at psychiatrist or psychologist treatment sessions, authorization for regular contact with the employee's treating mental health professional to confirm compliance), but the general framework would be the same, and any violation would result in termination. Courts have yet to focus on the use of Last Chance Agreements in the case of mental conditions, but their willingness to enforce them in the context of drug and alcohol abuse suggests that they would not react negatively to them in this other context.

The Benefits

Whether in the context of drug and alcohol abuse, or when dealing with employees with mental disabilities, a well thought-out and carefully drafted Last Chance Agreement can result in a true “win-win” situation for the employee and the employer. The employee faced with the prospect of losing his or her job will have a very tangible incentive to address an existing drug, alcohol or mental illness problem. The employer will have retained an employee with concrete and verifiable conditions in place aimed at protecting its workplace from the effects of drug and alcohol abuse, or uncontrolled or untreated mental conditions. The Last Chance Agreement also provides a straight-forward way to defend termination decisions based on a violation of the terms of the agreement. Although obviously not appropriate in every situation, the Last Chance Agreement should become an important tool for employers impacted by the continuing societal problem of drug and alcohol abuse, and the often difficult task of dealing with employees with mental disabilities.

Coping with employee drug and alcohol abuse, and its inevitably harmful effects on the workplace, remains a significant problem facing employers today. According to the U.S. Department of Labor (DOL), more than 14 million Americans use illegal drugs. The numbers for alcohol abuse are equally staggering, with more than 12 million Americans classified as heavy drinkers. See www.dol.gov/asp/programs/drugs/workingpartners/stats. According to the DOL, “most individuals who abuse alcohol and other drugs are employed,” and, as any manager or human resources professional can attest, “when they arrive for work, they don't leave their problems outside the door.” Id.

As if dealing with the impact of drugs and alcohol abuse in the workplace were not difficult enough, a plethora of federal, state and sometimes local laws are implicated. The Drug Free Workplace Act, 41 U.S.C. '701, et seq., requires certain federal contractors to maintain a drug-free workplace and establish a drug-free awareness program. Under the Americans with Disabilities Act (ADA), 42 U.S.C. '12101, et seq. , a drug addict who is not “currently” using illegal drugs (although what “currently” means is unclear) and an alcoholic may be considered disabled and therefore protected against discrimination based on their condition. Under the Family and Medical Leave Act (FMLA), 29 U.S.C. '2601, et seq., drug addiction or alcoholism might qualify as a “serious health condition” triggering application of the FMLA leave entitlement provisions. On top of this, a whole host of state and local laws analogous to the ADA and FMLA might apply.

Beyond navigating these often complex and overlapping laws, an employer might be reluctant to lose a valued employee who may be going through a difficult time and who, with appropriate support and assistance, could again become a useful contributor to the organization. Yet, employers cannot ignore the potential consequences of tolerating the effects of drug and alcohol abuse in the workplace. So the question becomes: How can an employer protect its workplace from the often harmful effects of employee drug and alcohol abuse, avoid accusations that it is discriminating against an employee because of a purported addiction disability, and, at the same time, help an employee who was once a valuable and productive contributor to become so again? The answer may lie in a carefully crafted “Last Chance Agreement.”

Last Chance Agreements developed in unionized settings, but more recently have been used successfully by non-union employers to manage employees with demonstrated or admitted drug or alcohol problems. The premise on which every Last Chance Agreement is based is that the employee has committed some sort of offense, or his or her performance has deteriorated to such a degree, that, in the employer's view, termination is justified. For example, a employee may have come to work under the influence of drugs or alcohol, missed a critical meeting, not shown up for work, or exhibited a pattern of excessive absenteeism, hostile behavior or carelessness ' all attributable to a chemical dependency issue or alcohol abuse. It is not at all unusual for the employee to first disclose, or admit to, the existence of a drug or alcohol problem during a disciplinary meeting where it becomes obvious that the employee's job is in serious jeopardy. The employer agrees not to fire the employee, but only if the employee abides by very specific conditions necessary in order to keep his or her job. These conditions are spelled out in a Last Chance Agreement, and the employee's violation of any of its terms will result in immediate termination (although the agreement could provide for lesser consequences resulting from lesser violations).

A Last Chance Agreement can serve as an effective catalyst for an employee's recovery ' possible loss of employment can be a powerful incentive. Nevertheless, it is unfortunately inevitable that some employees will violate the terms of their Last Chance Agreement and will be fired. It is also inevitable that some of these terminated employees will sue their former employers, arguing that their termination was discriminatory, and that the Last Chance Agreement was not valid or itself an act of discrimination. Courts, however, have routinely rejected such challenges.

Applying general contract principles, courts have concluded that a termination based on a violation of a Last Chance Agreement is not tantamount to discrimination, but rather the result of a breach of contract, and that such a termination is entirely legal and appropriate because it was a clearly stated consequence of a violation of any of its terms by the employee. See , eg , Mararri v. WCI Steel, Inc. , 130 F.3d 1180, 1181-85 (6th Cir. 1997); Longen v. Waterous Co. , 347 F.3d 685, 688-89 (8th Cir. 2003); Fuller v. Frank , 916 F.2d 558, 561-62 (9th Cir. 1997); Mayo v. Columbia University, 2003 WL 1824628, 5-6 (S.D.N.Y. 2003). Indeed, many courts have recognized that Last Chance Agreements can themselves satisfy an employer's “reasonable accommodation” obligation under the ADA and analogous disability discrimination laws. See , eg , McKey v. Occidental Chemical Corp. , 956 F. Supp. 1313, 1319 (S.D. Tex. 1997); Goldson-El v. Runyon , 812 F. Supp. 558, 561 (E.D. Pa. 1993).

What to Include

What conditions should be included in a Last Chance Agreement? As a threshold matter, employers should be mindful that the terms should be reasonable in scope and related to the employer's legitimate concerns for maintaining a workplace free of the effects of drug or alcohol abuse. Like any contract, a court might not enforce a Last Chance Agreement it considered to be unconscionable or the result of overreaching. See, Mararri at 1184 (upholding Last Chance Agreement absent evidence of overreaching or exploitation). Beyond this general requirement, however, the particular terms of a Last Chance Agreement will depend on the particular circumstances presented, with more stringent conditions logically placed on an employee in a position of greater responsibility, one which has safety implications, or on an employee who committed a particularly serious infraction on the job.

There are, of course, some general elements that should always be considered when drafting a Last Chance Agreement.

The Agreement should recite that, based on the employee's conduct (eg, a positive drug test result, an incident of intoxication, repeated failures to show up for scheduled meetings), the employer has concluded that it has grounds to fire the employee, but is prepared not to do so if the employee agrees to abide by the terms of the agreement. This is a critical requirement because it establishes that there is consideration for the employee's agreement – the employer has given up the right to immediately terminate the employee in exchange for the employee's commitment to the terms of the agreement. See Mararri at 1183.

A clear description of precisely what is required of the employee under the terms of the agreement. Again, this must be tailored to the particular situation, but typical provisions include:

• Documented successful completion of a substance (or alcohol) abuse treatment program (in-patient or out-patient) prior to return to work. Many health plans, in fact, pay for all or a portion of the costs of these programs.
• Enrollment in an after-care program (or participation in an Employee Assistance Program) after returning to work, and documented evidence of continued compliance with program requirements.
• Agreement by the employee to authorize the release of treatment information directly from the treatment program in which he or she is enrolled to the employer to confirm compliance.
• Submission to random (or regular) drug or alcohol testing, with the explicit understanding that any positive result will be deemed a violation of the Last Chance Agreement.
• Conformity with all workplace-conduct rules (which may be important where an employee has displayed uncooperative or hostile behavior).
• Compliance with regular attendance requirements of the job (subject, of course, to the requirements of the FMLA).
• An explicit statement that the employee acknowledges that a violation of any of the terms of the Last Chance Agreement will be grounds for immediate termination.
• The time period during which the Last Chance Agreement will remain in effect. In some Last Chance Agreements, it will be appropriate to have the agreement extend for a longer time period (perhaps several years). It may also make sense to have certain conditions expire on certain milestone dates, so that as the employee exhibits sustained compliance, compliance becomes less onerous.
• As with any contract, and especially with contracts between employer and employee, the Last Chance Agreement should be written in clear and precise language, and without “legalese,” so that the typical employee can understand exactly what is required of him or her, and the consequences of non-compliance.

Other Uses?

One of the as yet untested areas of the law involving Last Chance Agreements is the extent to which they can be effectively utilized beyond the context of drug and alcohol abuse. One logical extension would be to situations involving employees with mental disabilities who have committed some act of misconduct, or exhibited deteriorating performance attributable to a mental disability. In those cases where treatment or medication will likely have a positive effect on the employee's ability to function in the workplace (as is often the case with conditions such as depression and bi-polar disorder), a Last Chance Agreement might be an effective means of retaining a previously valuable employee, but at the same time putting in place safeguards to insure that the employee's mental condition does not again have a deleterious impact on the workplace. Obviously, with mental conditions the requirements in the Last Chance Agreement will be different from that applicable in the case of drugs and alcohol (and could include such things as completion of an in-patient program before returning to work, regular attendance at psychiatrist or psychologist treatment sessions, authorization for regular contact with the employee's treating mental health professional to confirm compliance), but the general framework would be the same, and any violation would result in termination. Courts have yet to focus on the use of Last Chance Agreements in the case of mental conditions, but their willingness to enforce them in the context of drug and alcohol abuse suggests that they would not react negatively to them in this other context.

The Benefits

Whether in the context of drug and alcohol abuse, or when dealing with employees with mental disabilities, a well thought-out and carefully drafted Last Chance Agreement can result in a true “win-win” situation for the employee and the employer. The employee faced with the prospect of losing his or her job will have a very tangible incentive to address an existing drug, alcohol or mental illness problem. The employer will have retained an employee with concrete and verifiable conditions in place aimed at protecting its workplace from the effects of drug and alcohol abuse, or uncontrolled or untreated mental conditions. The Last Chance Agreement also provides a straight-forward way to defend termination decisions based on a violation of the terms of the agreement. Although obviously not appropriate in every situation, the Last Chance Agreement should become an important tool for employers impacted by the continuing societal problem of drug and alcohol abuse, and the often difficult task of dealing with employees with mental disabilities.