The Sophisticated Employer Blog

Remember the thrill you felt the first time you added a contractual limitations period to the back of your employment application, or in the handbook acknowledgment? Ahh, good times.

You just knew that you had done something important that one day would defeat an employee’s claims against the company. Well, it still can, for some claims. But, not so much for others. 

If you’re not sure what a contractual limitations period is, let me explain. It’s a contractual commitment that an employee will bring claims against the company within an agreed upon period, usually significantly shorter than what the statute of limitations provides for that claim. For Michigan employment claims, it’s pretty well established that 180 days is a reasonable amount of time to bring a claim and, as to state law claims, those agreements continue to be enforced.

But, we have known for years that the Equal Employment Opportunity Commission (EEOC) has frowned on such clauses. This doesn’t surprise me, but the logic behind the argument escapes me. The administrative process in Title VII (the federal civil rights law that protects against discrimination based on race, sex, national origin, religion, color, etc.) provides that claims must be filed within 180 days of the alleged discriminatory act except in states where there is an anti-discrimination law and an agency that can enforce it (commonly referred to as a work sharing arrangement), then the employee has 300 days.

So, if half the country has 180 days by statute to bring their claim, why can’t the other half of the country agree to this time frame? Just because.

The argument is that the employee is giving up a substantive right. Well, that’s just silly. You have all of your substantive rights you just have to exercise them in a timely manner.  My theory is that time flies and if you snooze you lose. Oh well, apparently the law according to the author isn’t persuasive. Should be but isn’t.

So, why am I complaining about this now? Because I just came across Thompson v Fresh Products, LLC, another case by the U.S. Court of Appeals for the Sixth Circuit that struck a six-month contractual limitations period’s application to the Age Discrimination in Employment Act and the Americans with Disabilities Act (ADA). In doing so, the appellate court relied on its prior analysis in Logan v MGM Grand Detroit Casino which, in 2019, had struck a contractual limitations period in a Title VII case.

Well, at least these agreements are still enforceable for federal claims brought under 42 USC 1981 and Employee Retirement Income Security Act (ERISA), and for claims brought under Michigan law. So, they still serve an important purpose.

So here are my two cents. I would still have a contractual limitations period on the employment application and in a handbook acknowledgement because (1) it is enforceable as to a lot of claims, and (2) the employee may think its enforceable as to all claims.

However, for this to be enforceable, you must add language that (1) applies the limitations period only as to the initial filing of the charge with the EEOC and allows the employee to still pursue their civil claims within 90 days of the right to sue letter, (2) states it only applies to claims to the extent permitted by applicable law and that the court can narrow/strike language so as to make it enforceable and achieve the parties’ intent, and (3) the handbook acknowledgment must be a totally separate, distinct document from the handbook (which, if written correctly, states the handbook does not create any enforceable contractual rights).

One caveat, the EEOC may find this to be a per se  violation much like it does when an employer’s handbook or job application provides notice the notice under Michigan law that “an employee needs to request accommodations for disabilities in writing within 182 days of the day the employee knows or should have known of the need” and the employer fails to tell employees that this is only required under Michigan law, not the ADA. So, consult with your own employment attorney especially if your company has a lot of federal contracts. 

My hope is that one sunny day the Supremes may rule on the issue and, if the majority is still conservative at the time, it may accept the law according to the author and agree that contractual limitations periods are an affirmative defense that can be used against all federal civil rights claims if written correctly.

By the way, just one additional tidbit for today: the Michigan Court of Appeals has ruled once more that a plaintiff can’t show a causal connection between the protected activity (filing an EEOC charge) and the plaintiff’s discharge when the decision maker was unaware of plaintiff’s EEOC charge at that time the decision was made. Davis v City of Detroit. Huh, makes sense to me.

The take-away is that you should work with your employment attorney to select the decision maker when terminating an employee. I am not suggesting any sort of gamesmanship. I am suggesting that who is charged with reviewing the facts and making the call is important because (1) the employee deserves to have someone who could not have an improper retaliatory motive make this important decision, and (2) it is important for the defense of the retaliation claim that may follow.