Northern Exposure

Last chance to draft your last chance agreement

by Mohamed Badreddine

Last chance agreements—what are they? How do they work? As we have indicated before, an employer and employee agree that the employee may remain employed provided that he or she complies with specific conditions. If the employee later breaches the conditions, he or she is immediately dismissed.

Barring exceptional circumstances, decision-makers in Canada will generally refuse to intervene where the history of the employment relationship justifies a properly drafted last chance agreement. But not always. Unifor, section locale 174 c. Cascades Groupe Papiers fins inc., division Rolland is an example of a situation where, despite a verbal last chance agreement between the employee and the employer, the Court of Appeal of Québec ordered the reinstatement of the employee who was dismissed for breaching the terms of the last chance agreement.


On June 3, 2010, the employee crashed into a column in the warehouse while driving a forklift. A blood alcohol test conducted following the accident revealed that the employee was significantly inebriated while driving the forklift. But the employee had 35 years of seniority. So the employer entered into a verbal last chance agreement with the employee instead of dismissing him.

Under the last chance agreement, the employee was to enter a treatment program proposed by the employee assistance program (EAP). The employee consulted a psychologist pursuant to the EAP, who recommended an outpatient treatment program.

Despite the psychologist’s recommendation, the employer instead asked the employee to undergo a 21-day inpatient detox treatment. Just two days after starting the program, the employee dropped out and began a one-year outpatient treatment program. The employer then dismissed the employee, claiming that he had breached the provisions of the last chance agreement. The employee subsequently filed a grievance.

Arbitration award

The arbitrator allowed the grievance, stating that the employer had initially and consciously decided not to dismiss the employee, the most severe sanction. The arbitrator explained that it [TRANSLATION] “should have exhausted all means to treat the complainant,” the outpatient program being one of those means. While the arbitrator agreed that the employee had engaged in serious misconduct and had breached the last chance agreement, the arbitrator ruled that the measure was disproportionate under the circumstances.

Judicial review

The employer took the case to the Québec Superior Court for judicial review. The Superior Court overturned the arbitrator’s decision. The Superior Court said that when an arbitrator is dealing with a last chance agreement, the only issue when determining whether the dismissal is justified is whether or not the agreement has been breached.

Court of appeal

The employee then appealed to the Québec Court of Appeal. The Court of Appeal granted the employee’s appeal.

The court reiterated that the employee had engaged in serious misconduct by driving a vehicle at work while under the influence of alcohol. However, the court said that the employer, through its actions, had acknowledged that the employee’s disciplinary record was not serious enough to justify dismissal.

The Court of Appeal explained that even though the principle of progressive discipline may be disregarded when an employee engages in gross misconduct, the decision-maker must consider the overall context of the employment relationship and assess whether or not the misconduct warrants dismissal. In this case, the employee had 35 years of seniority. Most importantly, there were other treatment options available.

The court also noted that a last chance agreement does not neutralize an arbitrator’s power to order an employee’s reinstatement unless it contains an express provision to that effect. The agreement in question was verbal and there was no such waiver.

Lessons to be learned

Even though many arbitrators in Canada enforce last chance agreements, employers should be careful when drafting such agreements. Below are a few recommendations to bear in mind:

• A last chance agreement should always be in writing, never verbal.
• When you draft a last chance agreement, pay careful attention to the conditions for reinstatement and sanctions.
• Always consider each case individually and avoid using “a one size fits all” approach.
• Mention the employee’s prior misconduct and disciplinary history in the last chance agreement to support the reasonableness of the conditions and sanction provided.
• Always include a clause limiting the arbitrator’s authority.

Finally, avoid knee-jerk reactions to minor misconduct when you learn of an apparent breach of a last chance agreement. Canadian employers still need to carefully assess whether the employee’s conduct breaches the agreement and whether the sanction is appropriate in the specific circumstances.

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