Former Employee’s Claims Barred By Shortened Statute Of Limitations Provision In Employment Application

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By: Carol G. Schley, Clark Hill PLC

The Michigan Court of Appeals recently reiterated that shortened statute of limitations provisions are enforceable in the employment context, and may be applied to claims not only asserted against an employer, but also to claims asserted against individuals employed by the employer.

In Clark v. Feinman, Case No. 324258 (Mich. Ct. App., February 16, 2016), Clark’s employment with IAC Mendon was terminated after he was involved in an altercation with a co-worker.  Over two years after he was terminated, Clark sued Feinman, the human resources specialist who made the decision to terminate him, claiming race discrimination.

Prior to being hired by IAC Mendon, Clark completed an employment application that shortened the statute of limitations for any claims he could assert in connection with his employment.  This provision stated:

I further agree not to bring any action or suit relating directly or indirectly to employment with IAC, or termination of such employment, more than 6 months after the date of termination of such employment and I waive any statutes of limitations to the contrary.

The trial court found that the above provision could not be applied to Clark’s lawsuit against Feinman, and therefore held that Clark’s race discrimination claim could proceed against her.  However, on appeal, the Court of Appeals found that the above provision did apply, and dismissed Clark’s claims as untimely, since they were filed more than 6 months after his termination.

In reaching this decision, the Court of Appeals noted that under Michigan law, an “unambiguous contractual provision providing for a shortened period of limitations is to be enforced as written unless the provision would violate law or public policy, or is unenforceable under traditional contract defenses, such as duress, waiver, estoppel, fraud, or unconscionability.”    These grounds did not exist, according to the court, and therefore the provision in the application was enforceable.  Further, the Court held that Feinman was an intended third party beneficiary of the provision, and therefore was able to rely on it in order to defeat the claims brought against her by Clark.  The Court noted that, as worded, the provision encompassed “those that were involved in plaintiff’s employment or termination,” and, therefore, “Plaintiff, when he signed the provision, was given notice that any action that was related to his employment or termination regardless of whether it was against IAC Mendon, IAC Mendon’s parent corporation, or individual employees involved in employment and termination decisions, must be brought within six months of his termination.”

The Clark decision is just the latest in a line of cases decided under Michigan law in which courts have found shortened statute of limitations provisions to be valid in employment applications, handbook acknowledgement forms, and other employment-related documents.  While there are some potential limitations on their use (e.g., the EEOC may refuse to recognize or abide by them, and in one case, a federal district court refused to enforce a six month statute of limitations in the context of federal discrimination claims because of wording much like the provision in Clark), they are generally an efficient and effective way to shorten the time period in which an employee or former employee can assert employment-related claims.  Therefore, it is recommended that employers include such provisions in their employment documents.  However, it is important to have the provision prepared or reviewed by legal counsel so it provides the broadest possible protection to the employer (and its employees who also may be sued, like in Clark) and to ensure it is compliant with Michigan law.

Carol G. Schley is a member of the Detroit SHRM Legal Affairs Committee and an attorney at the law firm Clark Hill PLC.  She can be reached at cschley@clarkhill.com or (248)530-6338.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. June 2016.