Walls v. Central Contra Costa Transit Authority
(U.S. Court of Appeals, Ninth Circuit, Case No. 10-15967, ___F.3d ___, 2011 WL 3319442, Aug. 3, 2011)
A recent decision by the Ninth Circuit Court of Appeals in Walls v. Central Contra Costa Transit Authority serves as a reminder to public employers that they should choose their words carefully when drafting “last chance agreements,” in which employers give employees who might otherwise be fired a final chance to correct their behavior, while having them waive their right to challenge later discipline.
Kerry Walls, a bus driver for the Central Contra Costa Transit Authority (“CCCTA”), was terminated on January 27, 2006. During his eleven years of employment, Walls had amassed approximately 50 different written warnings for attendance infractions, including two different notices of intent to terminate based on attendance issues in 2002. After he sustained three more “missouts” for failing to report to work or timely call in on three successive days in January 2006, CCCTA issued Walls a notice of intent to terminate. CCCTA notified Walls that he could protest his proposed termination at a conference scheduled for January 27, 2006. Walls failed to appear at the conference and was provided a notice of termination.
He was reinstated on March 2, 2006, under a Last Chance Agreement (LCA) executed during the course of a grievance between Walls (with a union representative in tow) and CCCTA. The LCA provided that “non-compliance with the stipulations [of the Last Chance Agreement] will result in your immediate and final termination.”
On March 3, 2006, Walls incurred an unexcused absence from work that violated the attendance requirements of the LCA and as a result, CCCTA again terminated Walls. CCCTA did not give Walls a Skelly hearing prior to his termination on March 6, but did allow the grievance process to go forward following his termination. The LCA was silent on whether the Skelly pre-termination process would be available. This became the focus of the Ninth Circuit’s opinion. The CCCTA argued that the LCA effectively made Walls an at-will employee, who was not entitled to any Skelly process. Walls argued that he did not knowingly waive his right to a pre-termination hearing because the LCA was silent on the issue. Walls sued, claiming, among other things, that his March 6 discharge denied him his due process right to a pre-termination hearing under the United States and California constitutions. The District Court concluded that Walls had waived in due process rights in the LCA.
NINTH CIRCUIT DECISION
The Ninth Circuit reversed the decision of the District Court on the due process claim. The Court first considered whether Walls had a protected property interest in his continued employment and second whether he received all the process that was due.
As to the first step, the Court held that Walls remained a public employee who could be fired only for cause. While the LCA specified that certain events had to occur in order for Walls to be terminated, it did not transform Walls’s status to that of an at-will employee, nor did it allow CCCTA to terminate him without any cause. Though the LCA specified and modified what constituted “just cause” for purposes of Walls’s termination, the Court found that it did not otherwise alter the employment terms of Walls’s collective bargaining agreement with CCCTA. Accordingly, the Court rejected CCCTA’s argument that Walls had become an at-will employee.
As to the second half of the analysis, the Court had no trouble deciding that because the LCA did not specifically waive Walls’s right to a pre-termination process, he had that right, and the employer violated his due process rights by failing to grant it. The Court did concede that public employees may waive their due process rights, but noted the “strong presumption against the waiver of constitutional rights.” The Court noted that the LCA stated: “[y]ou and your Union Representative may not grieve or arbitrate this matter if you fail to comply with these conditions.” The Court explained, though, that because grievance and arbitration are post-termination processes, this clause didn’t support the District’s argument.
Adding to the lesson of this case, the Court did not even give weight to the provision of the LCA stating that “non-compliance with the stipulations [of the LCA] will result in your immediate and final termination.” Use of the word “immediate,” the Court explained, did not clearly establish that termination would occur without a prior hearing or process of any kind – a very curious proposition indeed. In any event, in not clearly ruling out a pre-termination hearing in the event of non-compliance with the Agreement, the LCA imperiled the District.
A few practical points bear mentioning.
First, in our experience, many public entity employers use last chance agreements to facilitate the discharge of errant employees who prove unworthy after they have been given a reprieve from termination. The Walls decision illustrates that such agreements can be and are scrutinized by the courts. (Note: in some sectors, last chance agreements are unenforceable. See, e.g., Farahani v. San Diego Community College District (2009) 175 Cal.App.4th 1486, 1489 [holding that Education Code section 87485 renders “null and void” a last chance agreement under which community college faculty member purported to waive his statutory due process rights relating to faculty discipline].)
Second, employers who believe that a LCA is the way to go in dealing with an errant employee must carefully review their merit/civil service systems, charters, codes, collective bargaining agreements, and the like, to check for potential impediments and to assure that proper waivers can be constructed.
Third, the Walls decision plainly allows for the waiver of due process, including the waiver of pre-termination hearings. Even so, in certain cases, there may be a benefit to giving a last chance employee the opportunity to point out any defenses they may have to the enforceability of the last chance agreement.
RSHS partner Timothy G. Yeung and associate Ivan Delventhal are the firm’s point persons on this issue. Tim’s contact information: (916) 273-1710 or email@example.com. Ivan’s contact information:
(415) 848-7218 or firstname.lastname@example.org com.
The foregoing does not constitute legal advice, and should not be relied upon in connection with actual situations. Questions about the law in this area should be directed to an attorney for advice.