Last Chance Agreements - Protecting Employers While Giving Employees A Second Chance

Tuesday, May 1, 2007 - 01:00

In recent years, last chance agreements ("LCA") and return to work agreements ("RWA") have been gaining support from employers and courts alike. Under these agreements, instead of terminating an employee on the spot for committing an infraction, employers permit the employee to return to work subject to conditions specified in the LCA or RWA. These agreements state the specific terms by which the employee must abide to maintain his or her employment, and specify that failure to abide by the terms will result in termination.

In situations in which an employee's original infraction occurs as a result of the employee's drug or alcohol use, the agreements typically have provisions that require the employee to enter some sort of rehabilitative therapy and provide that further use of an illegal substance or alcohol will result in termination. If the employee relapses and is then terminated because he has violated the agreement, the employee may claim that his or her termination is discriminatory and violates the American with Disabilities Act (the "ADA") or a similar state law. Courts have rejected this claim. Termination in those instances is not discriminatory, but rather the result of the employee breaching his or her agreement - an agreement that the employee voluntarily entered into and one that is supported by valuable consideration, specifically, the employee's continued employment.

For example, the Ohio Supreme Court in Partlow v. Blue Coral-Slick 50, 2005 WL 1792611 (Ct. App. Ohio 2005), held that an employer's termination of an employee for failing to abide by his RWA did not violate the ADA. In Partlow, the employee had informed his employer that he had a drinking problem; in turn, the employer offered him the use of its employee assistance program ("EAP"). During an outpatient counseling meeting with a counselor from the EAP, the employee divulged that he also had a drug addiction. Once the employee relapsed into drug use, the employer placed him on medical leave while he obtained inpatient care at a treatment facility.

Thereafter, the employee was given permission to return to work, conditioned upon signing a RWA that required, among other things, that he submit to unannounced drug and alcohol testing and that confirmed positive test results, or failure to abstain from the use of alcohol and controlled substances, would result in the termination of his employment. He returned to work, but eventually used and tested positive for illegal drugs in violation of the agreement. The employer terminated his employment for violating the terms of his RWA.

The employee claimed that his termination violated the ADA because the RWA changed the terms of his employment solely because he was seeking treatment for drug addiction and depression. Rejecting this argument, the court held that while "current drug rehabilitation is considered a disability under the law, current drug use is not." Therefore, by ingesting drugs, the employee breached the terms of his RWA, and the employer had a legitimate, non-discriminatory reason for terminating his employment.

Courts, such as the Eighth Circuit Court of Appeals in Longen v. Waterous Co., 347 F.3d 685 (8th Cir. 2003), routinely reject the claim that the agreements themselves violate the ADA because they subject the employee to different employment conditions than other employees not subject to such agreements. In Longen, the court held that neither the termination of an employee for his use of mood-altering chemicals in violation of his LCA, nor the agreement itself, was discriminatory. There, the employee had battled substance abuse throughout his employment and had entered chemical-dependency treatment multiple times. After the second treatment, the employee entered into a LCA that allowed him to return to work without discipline. The employee relapsed three subsequent times, and each time the employee entered into another LCA. The final LCA stated that, among other things, "'[f]uture use of any mood altering chemicals, including alcohol or violation of working rules generally related to chemical dependency will result in immediate termination of employment.'" When the employee was arrested four years later for driving while intoxicated, the employer terminated his employment. While the employee alleged that the LCA itself violated the ADA, the court held that the basis for this claim - that the LCA subjected him to employment conditions different than those of other employees - was not discriminatory because "all return-to-work agreements, by their nature, impose employment conditions different from those of other employees." Additionally, the court held that "[t]he terms to which [the employee] agreed were supported by valuable consideration - i.e., that he would not be terminated[,]" and the employee freely entered into the contract.

Courts also have upheld terminations of employees for failure to meet the terms of LCAs implemented to accommodate their alcoholism. In Mararri v. WCI Steel, Inc., 130 F.3d 1180 (6th Cir. 1997), an employee had been party to two LCAs, the second of which provided that urine samples that tested positive "at any level[,]" or "reporting to work after having consumed alcohol" would be sufficient cause for his termination. When the employee was subjected to a random urine test at work that revealed alcohol in his system, he was terminated for breaching his LCA. The employee brought an action against his employer, claiming that his termination violated the ADA because alcoholism was a protected condition under the Act. He claimed that because he did not drink while on the job, but rather the night before, he had not violated any policy of his employer and thus was being treated differently than non-alcoholic employees. The court held, however, that by testing positive for alcohol, he had violated his LCA; despite this agreement not being a company-wide policy, the employee had accepted this term of employment by signing his LCA which stemmed from his previous violation of the company-wide policy of not being intoxicated while at work. Thus, while the court agreed with the employee that alcoholism was a disability under the ADA, it distinguished between the employee's violation of the terms of the LCA and his alcoholic condition, and upheld the termination as a result of the breach of the LCA.

Well-drafted LCAs and RWAs are viable ways to enable an employee to remain employed after committing an infraction. At the same time, such an agreement preserves the employer's right to terminate that employee should he or she violate its terms.

Kevin B. Leblang is a Partner and Chair of the Employment Law Practice of Kramer Levin Naftalis & Frankel LLP. He can be reached at (212) 715-9306. Robert N. Holtzman is a Partner in the Employment Law Practice of Kramer Levin. He can be reached at (212) 715-9513.

Please email the authors at kleblang@kramerlevin.com or rholtzman@kramerlevin.com with questions about these articles.