In some circumstances an employer may wish to provide an offending employee a final opportunity to correct his or her conduct before taking the irrevocable step of terminating the employee. At the same time, the employer does not wish to risk a successful challenge before an arbitrator if the employee commits another serious offense and is therefore discharged. Thus, often an employer offers to forgo terminating the employee in exchange for the employee's agreement to enter into a "last chance" agreement (LCA). The obvious benefit to the employee of entering into an LCA is that he or she has escaped the ultimate penalty of discharge.

            Because of their mutual benefit (at least in theory) to both the employer and the employee, LCA's have been increasingly used in the workplace to resolve disciplinary disputes. Consequently, the existence of an LCA has often been an issue in arbitration cases. Arbitrators have generally ruled that LCA's do not remove the employee from access to the grievance/arbitration provision of a collective bargaining agreement. See e.g. Veolia Transportation v. ATU, Local 1091, 125 LA 1334 (Neumeier, 2008);cf. Hamilton v. General Electric, 556 F.3d 428 (6^th Cir. 2009) (the terms of an LCA prohibiting an employee from pursuing statutory remedies for future disputes are unenforceable). But see Tootsie Roll Indus. v. Local Union No. 1, 832 F. 2d 81 (7^th Cir. 1987) (LCA that provided the union could not challenge subsequent discipline through grievance procedure determined non-arbitrability of new disciplinary action).

           The majority of arbitrators, encountering a case involving an LCA, believe that their authority is very limited.  Typical is the discussion in East Hartford (CT) Housing Authority v. AFSCME, Council 4, Local 818, 110 LRP 65144 (Celentano, 2010), in which the arbitrator addressed the impact of an LCA in the following terms:

A last chance agreement  is, in effect, a recognition that the employee has already engaged in conduct meriting termination but is given one last chance to save her job. In short, the elements of just cause such as notice, progressive discipline, a penalty proportionate to the offense, etc., does not apply. An employee may be fired for even a trivial rule violation and no further progressive discipline need be imposed. Put another way, the violation of the last chance agreement  provides the "just cause" for the employee's termination. 

See also Hugo Bosca Co.,109 LA 533, 538 (Franckiewicz, 1997) (“Thus under the usual last chance agreement, the arbitrator’s duty is limited to interpreting  the last chance agreement and to determining the facts.”).  Consequently, while arbitrators have their usual discretion in finding facts, interpreting  and resolving ambiguities in the terms of an LCA, and perhaps in determining whether its duration is for a reasonable length of time, they do not ignore its language when unambiguous. Of course, the burden of proving the violation of an LCA remains on the employer.  Teamsters Local Union 769 v. UNICCO Service Company, AAA No. 32 300 00484 06, 111 LRP 14215 (Ryce, 2006) (in cases involving an LCA, “the burden of proof remains with the Company to establish by a preponderance of the evidence that the alleged offense occurred”).

          Nevertheless, not all arbitrators agree that their powers are so restricted.  Some arbitrators have ruled that an LCA cannot waive the “just cause” requirement of an collective bargaining agreement.  Central Ohio Transit Authority, 113 LA 1134 (Imundo, 2000).  Others do not believe that an LCA does not have the same status as a collective bargaining agreement, and are willing to reevaluate whether the conduct warranted the discharge called for in the LCA.  These decisions are problematic, because several courts disagree with them and will vacate arbitration awards which ignore the unambiguous terms of an LCA. In  Int'l Union of Operating Eng'rs v. Cooper Natural Resources, 163 F. 3d 916 (5^th Cir. 1999), the court discussed the issue in the following language:

When Cooper Natural and the union entered into the LCA, reducing Gates's punishment for failing the drug test, the parties formed a binding contract pursuant to the CBA which was entitled to enforcement by the arbitrator as "the parties' chosen means of dispute resolution." Bakers Union Factory No. 326 v. ITT Continental Baking Co., Inc., 749 F.2d 350, 354 (6th Cir.1984). The LCA must be thought of as a supplement to the CBA and is just as binding upon the arbitrator. This has been the rule in three of our sister circuits, and we adopt it today as the governing law for this court. Cf. Coca-Cola Bottling Co. v. Teamsters Local No. 688, 959 F.2d 1438, 1440 (8th Cir.), cert. denied, 506 U.S. 1013, 113 S.Ct. 635, 121 L.Ed.2d 566 (1992); Ohio Edison Co. v. Ohio Edison Joint Council, 947 F.2d 786, 787 (6th Cir. 1991); Tootsie Roll Indus., Inc. v. Local Union No. 1, 832 F.2d 81, 84 (7th Cir.1987).

Accord, Boise Cascade Corp. v. Paper-Allied Indus., 309 F. 3d 1075 (8^th Cir. 2002) (“Even a de minimis violation of an LCA entitles the employer to impose the sanction provided for under the LCA.”).  See also Warrior & Gulf Navigation Co. v. United Steelworkers, 996 F.2d 279 (11th Cir. 1993), cert. denied, 511 U.S. 1083 (1994),(when the labor contract specifically mandated immediate discharge for any employee who tested positive twice for drugs, an arbitration award reducing a discharge on that ground to a suspension was vacated).   But see, United Food Workers v. Illinois-American Water, 569 F3d 750 (7th Cir. 2009) (an arbitrator need not follow the terms of a challenged LCA, even if that challenge eventually is unsuccessful).

           LCA’s can be a useful and mutually beneficial way for employers and employees, and the unions who represent them, to preserve an employee’s job  when a discharge is otherwise likely. All parties should pay careful attention to determine whether an LCA’s terms are acceptable to them, for its language, if sufficiently clear, will probably dictate the outcome of arbitration over future disciplinary action against the same employee.