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Not So Fast – Court of Appeals Invalidates Shortened Limitations Period in Employee Handbook

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Not So Fast – Court of Appeals Invalidates Shortened Limitations Period in Employee Handbook

Employers seeking to shorten applicable statutes of limitations for employment claims through employee handbooks are struck a blow by the Sixth Circuit. In Logan v. MGM Grand Detroit Casino, the Court held that a “contractually shortened limitation period... is incompatible with the grant of substantive rights and the elaborate pre-suit enforcement mechanisms of Title VII... Plaintiff is entitled to a 300-day statutory limitation period.” The result is that employers in Michigan and elsewhere should revise any provisions in employee handbooks or similar policies that seek to shorten the statute of limitations for employment-related claims.

In a case of “first impression,” the Logan plaintiff’s application for employment included a clause shortening the statute of limitations for any lawsuit arising out of her employment with the defendant to six months from 300 days. The defendant moved for summary judgment on plaintiff’s Title VII action as time barred. After the trial court granted summary judgment, the appellate court reversed and held that Title VII’s statute of limitations is a substantive right that cannot be contractually shortened.

The Logan court held that a statute of limitations is a substantive right, and therefore not subject to contractual modification if the underlying statute contains its own statute of limitations. On the other hand, §1981 and ERISA, for example, do not contain limitation periods and would, therefore, be subject to shortened limitations clauses in employee handbooks or similar documents. However, other statutes, such as the Fair Labor Standards Act (FLSA), that contain statutes of limitations would negate a contractual limitations clause. As Title VII falls into the “substantive” category, the contractual limitations clause was not enforceable.

The 300-day statutory limitations period arises from Title VII’s rule that a person cannot sue under Title VII without having first brought the dispute before the Equal Employment Opportunity Commission (EEOC) for resolution. The EEOC process begins with a “charge filed by the person alleging discrimination.” Generally, the charge must be filed with the EEOC “within 180 days of the occurrence of the alleged unlawful employment practice,” but the filing period is extended to 300 days in Michigan if an individual either (a) institutes proceedings with the Michigan Department of Civil Rights (MDCR) and also then files the charge with the EEOC; or (b) files only with the EEOC, which under the work-sharing agreement with MDCR, refers the charge to MDCR.

Finally, the panel addressed arbitration agreements and the Federal Arbitration Act (FAA). There was no arbitration agreement at issue in Logan, but the panel discussed a prior case where they had upheld a contractually shortened Title VII limitations period found in an arbitration agreement because after “carefully balancing the liberal policy favoring arbitration and the important goals of federal anti-discrimination statutes,” they found the shortened period to be long enough to allow the plaintiff to vindicate her statutory rights in the arbitral forum.

Therefore, employers seeking to shorten the time period for employees to sue the company for various claims should craft new policies and/or consider the use of arbitration agreements to accomplish the same goal. 

If you have any questions about the information in this post, please contact Noah Hurwitz (nhurwitz@dykema.com or 734-214-7617), Andrea Frailey (afrailey@dykema.com or 313-568-6651) or your Dykema relationship attorney.