A Guide to Last Chance Agreements

A Guide to Last Chance Agreements


Managing personnel brings with it any number of potential problems. Being a supervisor or risk manager means being responsible for the performance of the employees within your organization.

Sometimes, employees have issues that affect their ability to effectively carry out their duties. If those issues are bad enough, they can warrant termination. But there are tools available for managing employees who are otherwise an asset to the organization and who need to take corrective actions to address those issues.


One such tool is known as a Last Chance Agreement. Like many employment issues, executing a Last Chance Agreement requires some level of management acumen. Taking such steps incorrectly can result in liability for your organization, so it is something you will want to ensure is done properly.

Here are a few things you will want to know about Last Chance Agreements before attempting to create one with an employee.

Consult Your Insurance Company Before You Do Anything Else

Much of risk management involves coordinating regularly with your organization’s insurance company on any issues that could cause legal problems later on. Personnel-related decisions certainly fall under that category.

Your insurance agent will refer you to an employment attorney to mitigate any risks that may result from a possible subsequent termination. Talk to that attorney and get a clear understanding of the steps you must take and how to go about doing them. Following that advice will save you and your organization many headaches if things ultimately take a turn for the worse.

Take Care When Crafting the Document

A Last Chance Agreement is a legal document that codifies expectations between the employer and employee. The attorney that your insurance company refers you to will likely have a template Last Chance Agreement that you can use to craft your own. You will then have to tailor it to the specific circumstances involving the employee whose behavior you wish to correct.

Many organizations have employee handbooks in place, and for good reason. New employees are given copies that include a signature sheet. Signing the document indicates that they have read and understand it. Having that in place will go a long way towards creating a Last Chance Agreement that will serve its intended purpose.

In the text of the agreement, you will want to create a narrative of events explaining why the corrective action is needed. If the employee’s conduct is in violation of the expectations set forth in the employee handbook, refer to the applicable sections of that document in the agreement.

Many Last Chance Agreements have a one-year deadline on them, so you will want to include that in the text. Once it has been signed by all parties, make it part of the employee’s file.

Document Every Step of the Process

Clear documentation is important, in the event that the agreement does not work out and the employee is terminated for failing to live up to it. You will want to keep a clear narrative, complete with dates and as much specific information as possible. That way, if a lawsuit is filed, your insurance company’s attorney will be able to use those documents as part of your organization’s defense.

The staff at ABI Insurance is more than happy to help answer any questions that may come up, to ensure that the entity you’re managing is covered and as protected against risk as possible.

ABI Insurance has additional loss control resources and hotlines for management liability issues. Ask your agent if you have an incident or potential situation developing so they can bring the best resources to bear on your behalf.

For more information on the products and services offered by ABI, call 503-292-1580 or go to https://abipdx.com/.