Protect firing rights: Last-chance agreement.

It makes sense to give a second chance to good employees whose performance is slipping because of personal challenges. You can protect against future lawsuits by imposing a formal last-chance agreement that says any subsequent transgression will result in termination.

Recent case: Paul, a Boeing mechanic, struggled with drug addiction and depression. His performance deteriorated and he missed work frequently. After a stint in FMLA-covered rehab, Paul returned and signed a last-chance agreement. It called for immediate termination if he had two attendance infractions in the next 10 months. He had to arrive on time, call in to report late arrivals and submit all required FMLA paperwork.

When he missed an...