In a recent decision involving the validity of a last chance agreement, the Sixth Circuit concluded that the embedded release of all claims against the employer was not knowingly and voluntarily entered into by the employee and therefore unenforceable under common law principles applied to contract waivers generally.
In Moore v. Coca Cola Bottling Company Consolidated, Moore, a pallet builder, was involved in a minor forklift-related accident and tested positive for marijuana. Notably, his positive test was below the minimum threshold in the company’s drug policy. He was required to sign a second chance agreement as a condition of continued employment. Several months later, the company announced at a pre-shift meeting that due to food safety concerns the employees could no longer “stage products outside the warehouse.” A heated discussion followed, as employees and management disagreed over what the workers viewed as an inefficient work rule. Moore intervened to defuse the conversation, stating: “F it, if they want you to slow down, slow the hell down and get back to work.” Moore was accused of instigating a work stoppage and terminated for insubordination and use of profane language.
Moore’s Last Chance Agreement (LCA)
The union and the company agreed to reinstate Moore if he signed a twelve-month last chance agreement (LCA). The LCA provided that Moore was releasing and forever discharge the company and the union “from any and all liability of any kind whatsoever, relating to his employment with the company, arising prior to the date of the LCA.” Subsequently, two days before the expiration of the LCA, he again tested positive for marijuana and was terminated.
Moore’s EEOC Charges and Claims of Racial Discrimination
A month after signing the LCA, Moore filed a charge with the EEOC alleging that he had been placed on the LCA due to his race, claiming that others in the pre-shift meeting had also used profane language and not disciplined. Two years later, he filed a second EEOC charge claiming other workers used drugs and often showed up at work impaired with no consequences.
District Court’s Summary Judgment and Sixth Circuit’s Reversal
Upon Moore’s filing his complaint in the District Court, the company filed for summary judgment and argued that he waived any claims of racial discrimination under the LCA. The District Court agreed. However, on appeal, the Sixth Circuit, relying on federal common law principles regarding waiver of contract claims, found a material issue of fact as to whether Moore voluntarily waived his pre-LCA claims.
Factors Determining the Voluntariness of Waiver
The common law standard considers a medley of factors to determine whether a waiver was voluntary:
- The plaintiff’s experience, background and education
- The amount of time the plaintiff had to consider whether to sign the waiver
- Whether the plaintiff had time to consult with an attorney
- The clarity of the waiver
- Consideration for the waiver
- The totality of the circumstances
Lack of Clarity and Circumstances Surrounding Moore’s LCA
Although Moore possessed an associate’s degree in fashion merchandising and a bachelor’s degree in health-care administration, the Sixth Circuit found that those degrees did not sufficiently prepare him to interpret a legal document. Thus, there was a genuine issue of material fact as to whether Moore understood that he was specifically waiving his rights to bring past discrimination and retaliation claims by signing what the Sixth Circuit found to be an “opaque LCA.” That was especially so when viewed in conjunction with the circumstances surrounding the signing.
Moore stated that the meeting discussing the LCA was only ten minutes long, with two minutes directed at reviewing the LCA. Furthermore, his union representative told him to just sign the LCA as it was “better to fight with a job than fight without a job.” The union representative also purportedly told Moore that the discrimination claims would survive his signing the LCA and Moore relied on that statement. The facts did not reveal whether he was required to sign the LCA the day it was presented or if he was able to request additional time. Although he did not have an attorney, there was no information provided as to whether Moore would have been permitted to request one prior to his signing the LCA. Thus, the Court determined that when reviewing the totality of the circumstances, there existed a genuine issue of material fact over the voluntariness of Moore’s waiver of his pre-LCA rights and remanded it for further proceedings.
Lessons for Employers
Employers may well heed the lessons learned here. Ignoring what appears to be a failure at the trial level to include some pertinent evidence, employers must assure they are well-prepared to defend their LCA by assuring up front:
- Do not assume an employee’s education and experience is sufficient to interpret the language of the LCA
- Draft the LCA in plain and simple terms
- Take the time to read through the LCA with the employee
- Allow the employee a reasonable time to review the LCA
- Encourage the employee to review it with an attorney
