It may seem odd to include a statement in an employment application or offer that limits the time that an employee has to file legal claims that may arise later in the employment relationship. Recent case law, however, suggests that it is something that all employers should consider and decide if it is appropriate for their business and their employees.
In the last three years, a line of case law has developed in Ohio and the Sixth Circuit that allows employers to limit the time period by which employees must bring claims arising from their employment. The cases all involved employers that included in their employment applications a provision stating that, by signing the application and subsequently accepting employment, the employee agreed to bring all claims arising out of the employment relationship within a certain period of time—a time period that is shorter than statutory limits. Some of the applications stated that any claims had to be filed within a period of time as short as six months.
The courts have upheld these provisions. The provisions have obvious advantages in that the employer’s exposure to claims is limited to a shorter period of time, and all employment claims are subject to the same limitations period. Further, forcing employees to bring actions sooner may result in more evidence and witness recollections being preserved to defend the action.
This issue first came to light a few years ago in the Sixth Circuit when an employer in Michigan placed a provision in its application requiring employees to bring any claims against the employer within six months, despite longer statutory limitations periods that might apply. The employees waited more than six months after the acts occurred to bring their claims. The employer defended, arguing that the application provision barred the claims. The trial court agreed, and the employees appealed. In Thurman v. DaimlerChrysler, Inc., 397 F.3d 352 (6th Cir. 2004), the Sixth Circuit upheld the provision under Michigan law.
It was unclear whether the Thurman rule would apply under Ohio law until the same application clause was held enforceable by the U.S. District Court for the Southern District of Ohio in Hoskins v. DaimlerChrysler Corp., No. 3:03cv338, 2005 WL 5588084 (S.D. Ohio Mar. 30, 2005). In Hoskins, the employee brought state law intentional tort, negligence, and loss of consortium claims arising out of a workplace injury. The Court first noted that the Ohio Supreme Court previously held that contractual provisions shortening the time to bring a lawsuit—outside the employment context—are generally enforceable as long as they are not unreasonable. Then, the Court noted that Michigan—like Ohio—only enforces contractual limitations shortening the time to bring a lawsuit if they are reasonable. Thus, the Court reasoned that the Thurman rule applied to claims arising under Ohio law. The Court held that the employment application provision was enforceable under Ohio law. Two other Ohio cases have recently upheld identical application provisions in employment actions against the same employer—Sanders v. DaimlerChrysler Corp., No. 3:05-CV-7056, 2006 WL 3256652 (N.D. Ohio Nov. 9, 2006) and Ellison v. DaimlerChrysler Corp., No. 3:06-CV-899, 2007 WL 3171758 (N.D. Ohio Oct. 30, 2007).
This, however, is not the end of the story. Courts in Michigan have chipped away at Thurman’s holding over the past three years. In Conway v. Stryker Med. Div., No. 4:05-CV-40, 2006 U.S. Dist. LEXIS 20753 (W.D. Mich. Apr. 18, 2006), the District Court for the Western District of Michigan held that the Thurman rule does not apply to claims brought under the Family and Medical Leave Act (FMLA). The Court in Conway called the provision a “trap for the unwary” and held it unconscionable as a matter of public policy. The Court further noted as support for its decision that FMLA regulations do not allow waiver of FMLA rights. The provisions have also been held unenforceable for these same reasons as to claims under the Fair Labor Standards Act (FLSA). Wineman v. Durkee Lakes Hunting & Fishing Club, Inc., 352 F. Supp. 2d 815 (E.D. Mich. 2005).
In Steward v. DaimlerChrysler Corp., 533 F. Supp. 2d 717 (E.D. Mich. 2008), a federal court sitting in Michigan held that contractual limits do not apply to claims, such as ADA or Title VII claims, where the employee’s right-to-sue notice from the EEOC is issued after the six-month period expires. In this instance, the Michigan court reasoned that because the employee cannot sue until he receives the right to sue notice, enforcing the contractual limit would effectively eliminate the employee’s right to sue under the statute. Yet, the court in Steward made it clear that, where the right to sue notice is issued within the six-month period, the contractual limitation applies. There is at least one decision in another circuit, however, that disagreed with the Michigan court’s logic and held that contractual limits do apply in these circumstances because the employee may still file within the six-month period and have the case stayed pending the disposition of the EEOC investigation. Badgett v. Fed. Express Corp., 378 F. Supp. 2d 613 (M. N.C. 2005).
What do Thurman and these Michigan cases mean for employers in Ohio? Can an employer limit an employee’s right to bring suits arising out of the employment relationship to a period of time shorter than that permitted by statute? Ohio courts, as well as the Sixth Circuit itself, have been silent on whether they agree with and will follow these Michigan decisions.
Employers wishing to revise their applications and insert provisions limiting the period of time for employees to bring suit must do so with some caution because, as to certain types of claims, specifically FMLA or FLSA claims and claims requiring EEOC determination, may render such limitations unenforceable, yet, the employer is in the same position it would have been in without the provision. As a result, employers should individually evaluate whether limiting the time to file employment actions makes sense for their employees and their business.