This guest post was authored by James Oldendorph

On August 3, 2011, the Ninth Circuit U.S. Court of Appeals held that a public employee had not knowingly waived his right to a due process pre-termination hearing by signing a “last chance agreement,” and that the public employer violated his due process right by not providing such a hearing prior to termination.

In Walls v. Central Contra Costa Transit Authority, a  public employee was terminated January 27, 2006 but then reinstated  March 2, 2006 pursuant to a last chance agreement which provided that any “non-compliance with the stipulations [of the agreement] w[ould] result in . . . immediate and final termination.”  Very soon thereafter, Walls violated the last chance agreement by incurring an unexcused absence from work.  He was then summarily terminated without any sort of pre-disciplinary procedure.  Walls then filed suit, alleging that his termination was improper, in part, because it was not preceded by a Skelly meeting.  The employer, in response, alleged that the employee was not entitled to any Skelly rights because the last chance agreement used language that demonstrated the employee’s status had been altered to “at-will,” thereby divesting him of any procedural due process rights.  The Court of Appeals disagreed.

The Court found, first, that it was not clear that the phrase “immediate and final termination” used in the context of a last chance agreement necessarily signaled that the termination would take effect without a hearing or process of any kind.  Second, the Court found that it was certainly not clear Walls knew and understood when he signed the last chance agreement that he was waiving his right to due process in the form of a pre-termination hearing.  Neither did he acknowledge or understand that he would thereafter be treated as an at-will employee. 

While recognizing that “[a] public employee may waive his right to due process,” the Court cautioned that “federal courts ‘indulge every reasonable presumption against waiver of fundamental constitutional rights’ and ‘do not presume acquiescence in the loss of fundamental rights.’” As a result, the Court found that the agreement’s failure to provide expressly that the employee would waive any Skelly rights and/or rights to a pre-termination hearing implied that those rights were not waived and remained intact. Accordingly, the Court found that the employer in fact violated the employee’s due process rights under the United States and California Constitutions when it terminated him without any procedural due process.

This case stresses the importance of public employers correctly drafting a “last chance” settlement agreement, i.e., one which clearly identifies the specific rights that are to be waived by the employee and one which specifies the consequences of further misconduct.