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Employment Law Guide

Does Your Company Require Employees to Accept Shortened Contractual Limitations Period?

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If your company does not require employees to agree to a shortened limitations period to bring claims, you need to do that today!

Today I am writing about contractual limitations, one of my absolute favorite defenses!

When one of my clients gets sued and doesn’t have a contractual limitations period agreement with the plaintiff, and it would have defeated the claims, I’m really, really, disappointed.

This has been a valid defense for claims brought under Michigan law since 2001. Therefore, there is no reason for any employer not to have this agreement with its employees.

When I read the decision in Dzurka v MidMichigan Medical Center-Midland wherein the Michigan Court of Appeals recently upheld the dismissal of the state law claims on this basis, I thought this was a great opportunity to remind employers just how important this is! 

Keeping the story brief, the plaintiff filed her complaint in the Midland Circuit Court on Dec. 5, 2017 (765 days after her termination of employment and 36 days after the dismissal of a related federal lawsuit). The trial court enforced a contractual limitations period found on the plaintiff’s 2007 employment application which stated:

Limitations on Claims. I agree that any lawsuit against MidMichigan Health and/or its agents arising out of my employment or termination of employment including but not limited to claims arising under State or Federal civil rights statutes, must be brought within the following time limits or be forever barred: (a) for lawsuits requiring a Notice of Right to Sue from the EEOC, within 90 days after the EEOC issues that Notice, or (b) for all other lawsuits, within (i) 180 days of the event(s) giving rise to the claim or (ii) the time limit specified by statutes, whichever is shorter. I waiver any statute of limitations that exceeds this time limit.

Not bad. I write mine a little differently, but this version did the trick in this case. The trial court found it enforceable and dismissed the lawsuit.

On appeal, the plaintiff argued that the “agreement” lacked mutuality of obligation and, therefore, it failed because it lacked consideration. The appellate court disagreed, recognizing that the grant of employment established consideration, and the dismissal was upheld. 

It is unclear whether a contractual limitations period is applicable to federal civil rights claims, but there are plenty of cases that suggest it would. Unfortunately, we know that contractual limitations will not apply to claims under the federal wage law (at least in the Sixth Circuit). 

Does your employment application have a contractual limitations period in it? If not, what are you waiting for?

A final note: it likely will not be enforceable if it is in the employee handbook because, if the handbook is written correctly, it starts off by saying “nothing in this handbook creates any contractual rights.”  

That means if the employer wants to enforce a term, it has to be in a separate “contract.”  If you need assistance in drafting a contractual limitations period, contact an experienced employment attorney.

Tags: Employment Liability, Human Resources

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