Will your last-chance agreement hold up?

Recently, an Ontario arbitrator dismissed a grievance challenging the termination of a long-serving employee, finding that he breached the last-chance agreement.

Employed by the same company for nearly 25 years, the individual saw his grievance dismissed – and his employment terminated – after a finding of wilful misconduct.

The case provides insights into the nuances, and best practices, when it comes to using last-chance agreements (LCAs).

“They are a very useful tool,” says Daniel Leone, partner at Mathews, Dinsdale & Clark in Toronto.

“There are many cases where an employer will go down the road of a last-chance agreement. They avoid the cost and uncertainty of arbitration.”

When used appropriately – meaning all the clauses are there, and an employer acts on them when there's a violation – these agreements can be effective tools, agrees Clifford Hart, partner at BLG in Toronto.

But they should be used carefully, he adds: “If you just throw them around, they're not going to be accepted by unions… when used inappropriately or infrequently and/or not implemented properly, then they could be problematic.”

LCA for absence management

The case, United Food and Commercial Workers Union, Local 175 & 633 v Cargill Limited (Dunlop), involved a butcher employed since 2000. He had previously been given a “Final Notice and Last Chance Agreement” (LCA) after an extended absence abroad in 2021-22.

The LCA stipulated “zero tolerance for any violation of the attendance management program during the first twenty four (24) months of active employment following the date of him to return to active employment. Any unauthorized absences will warrant termination.”

On July 17, 2023, the employee was absent and did not provide medical documentation. The arbitrator found he not only failed to submit timely documentation, “but provided the employer with no explanation as to why he acted in this fashion. Medical documentation, for whatever reason, only found its way to the employer several weeks later.”

The union argued the LCA was discriminatory and unclear, and that the butcher’s conduct did not amount to “wilful misconduct.” However, arbitrator John Martelli rejected these arguments, saying he saw no evidence “that there was in any way a causal connection” between the employee suffering from benign prostatic hypertrophy “and his ability to visit, or even call a medical practitioner to secure a doctor’s note.”

Martelli concluded that the butcher’s conduct constituted wilful misconduct as per Ontario’s employment standards: “His choice to not secure a medical note soon after his absence of July 17, 2023 was deliberate and intentional.”

The grievance was dismissed.

Why use an LCA?

The use of LCAs has been pretty frequent over the years, says Leone, and they’re largely used for two reasons: where there’s a termination that might not stick or if an employer has a termination case that they could probably win, but they elect to give the employee a second chance.

“There are a variety of reasons as to why that might happen. Perhaps the employee has otherwise been a decent employee; perhaps the employees is in a classification that is highly skilled and hard to replace,” he says.

In this case, the long-serving employee had booked off vacation, but it became clear to the employer that he took an excess period of time off in booking flights that would have extended beyond the permitted vacation time, says Leone, who represented Cargill in the case.

“Arguably, they could have won that case had they taken that case forward.”

But this individual was afforded the opportunity of a last-chance agreement.

“And, in many cases, if the employee breaches again, they often don’t even get a grievance. The union accepts, ‘OK, this person has done something, it’s a breach, we’re not even going to take the case…’ So, it is a very valuable tool, particularly in terms of avoiding the cost and expense of arbitration.”

If there are issues around ongoing misconduct, or a single act of a dischargeable offence, or there’s progressive discipline that results in a termination, or termination for  a significant event, the union may grieve, says Hart.

As a result, the employer could go to arbitration on the discharge, could resolve the issue or could give the employee a final opportunity to redeem the employment relationship through an LCA, he says, “so they are I think generally entered into after a termination rather than negotiated before termination.”

There are employers that may tell the union that they’re at the point of termination, but they will enter into a last chance to salvage the employment relationship, says Hart.

“There has to be a sophisticated employment relationship and relationship with the trade union to do that. Other times, it may be after you terminate to resolve a grievance or grievances rather than go to arbitration that you enter into a last chance.”

Too broad, too specific

In the Cargill case, the arbitrator found the language in the LCA to be clear, but usually employers want to go broad with the stipulations, while unions want to be as specific or limited as possible.

For example, saying the LCA covers the violation of any rules, policies, procedures or processes is pretty broad, which may be appropriate, says Hart, while other times it may be more refined, covering harassment, for example.

 “I generally like using them when they're specific to the reasons, for usually a discharge or a termination, and then resolving termination.”

And if an employer tries to fire somebody under an LCA where no other employee would be disciplined or even warned for that same event, that's where the employer needs to be prepared, he says.

“What you need to show to have it upheld is that the employee's conduct fits squarely within the requirements of a last-chance agreement. So, having a last agreement that's too narrow could be problematic; having a last-chance agreement that is too broad sometimes makes it difficult to enforce; and not applying it at all gets into … leading somebody with a false sense of security.”

Consistent enforcement of last-chance agreements

In the Cargill case, the employee signed the agreement in April 2022, but one year later, he was absent from work and did not provide supporting medical documentation. The two days were coded as “excused” and the employee was advised that he must provide documentation for further sick day absences to be considered excused. However, in June 2023, the butcher was again absent for two days, without documentation, and was told he “absolutely has no more chances.”

After he was again absent on July 17, 2023, with no explanation, his employment was terminated on July 24.

Realizing the union might argue that the LCA was of no force or effect since the employer chose not to trigger it on at least two occasions, the employer stressed in arbitration that any sense of “lulling” the employee into a sense of security was “cured” when he was advised that he had no more chances in the future.

For Hart, it is a problem when an employer gives those additional chances.

“If you have a last-chance agreement and an employer doesn't ‘act on it’ for two or three occasions and then tries to rely on it, there could be a problem enforcing it,” he says, so the way around that is, in good faith, to say to the employee, in writing, that their conduct was a violation of the terms of the last-chance agreement and their employment would be terminated pursuant to the LCA, however, they will be given one additional chance.

“In that Cargill case, it seems like that step was missed – no criticism with the company but that was missed – so then it leads somebody to saying, ‘Well, you lulled them into the false sense of security, that you weren't serious about it.’”

But the arbitrator did find that that messaging in the June meeting effectively corrected what had been “a series of indulgences,” says Leone.

“Obviously, unions have to represent their employees, and they'll advance whatever arguments they want to advance, but it can be disappointing when a union sees an employer giving an employee additional chances and… they choose to reference it as ‘Well, now the employee's been lulled into a false sense of security’ and so on.

“So, the big lesson for employers is if you are going to give that indulgence, it's probably important to reach an understanding with the union such that it's documented that ‘OK, we're granting an indulgence, but this indulgence won't be referred to or relied upon in any future hearing’ or something like that.”

Discrimination considerations with LCAs

In the Cargill case, the union also submitted that the LCA was discriminatory as it was used to terminate the butcher’s employment based on the protected ground of disability.

However, the arbitrator decide that this was not a human rights case: “At its heart, the grievor’s employment was terminated for failing to procure a medical note in a timely fashion following a sick day.”

Just because somebody is entitled to accommodation doesn't change the rules of the game in terms of following proper rules, etcetera – unless it's part of the accommodation, says Hart.

“If somebody has a disability, a handicap, workplace restrictions that maybe say that you could only produce 80 parts an hour instead of 100, that's an accommodation that exists, but that doesn't give them a protection or something else to come in late [to work].

“Where accommodation comes into a last-chance agreement is if there's been ongoing misconduct that's linked to a disability.”

Typically, this happens more with addiction cases, where the termination relates to the addiction, such as attendance issues, says Leone.

“What you can sometimes do is have an agreement with the union and the employee that says, ‘Look, we've met the point of undue hardship here. We've given you umpteen chances, so any further chance would be undue hardship.’ So, you can sometimes get around those issues that way.”

Wilful misconduct and just cause

One other interesting note about the Cargill case involves the issues of just cause and wilful misconduct.

There is recent jurisprudence where an employer might have just cause, but it doesn't constitute willful misconduct, so the employee is still entitled to notice and severance under the Employment Standards Act, says Leone.

He cites a recent case where a nurse gave the wrong medication, and while considered a just cause dismissal by the hospital, the arbitrator determined it was a careless, unintentional error so she was still entitled to severance pay.

“That’s another lesson for employers, is you probably want to ensure that your last-chance agreements also constitute an acknowledgement or agreement that if there's a breach, it's considered, in addition to being just cause for termination… to be willful misconduct under the Employment Standards Act.”

It’s a small but growing area that’s been seen in some arbitration cases, agrees Hart.

“There are a couple of other arbitrations where an arbitrator might have said [the employee was] ‘totally negligent, didn't follow all procedures, but it wasn't willful so even though I'm going to uphold the termination, I'm going to find that it wasn't willful and award employment standards.’

“That's new in Ontario that arbitrators are looking at – [they] might uphold it on cause but not willfulness… I haven't put in a last-chance agreement that ‘Should you violate this, it'll be deemed to be just cause and willful misconduct and neglect of duty,’ but based on the fact that the union raised that in Cargill, it might be something that I'd want to put in.”