Contractual limitations periods provide parties on both sides of an agreement certainty regarding the filing of a potential action. But many employers do not know that they may include such contractual limitations periods in their employment applications and agreements. Those contractual limitations periods can be effective in limiting exposure for potential claims.
In, King v. McLaren Health Corp., unpublished opinion per curiam of the Court of Appeals, issued Jan. 30, 2025; 2025 WL 352539 (Docket No. 366152), the Michigan Court of Appeals considered this issue. There, the plaintiff applied for a management position with the defendant employer. Included in the application was the following contractual limitations period:
4.In consideration of [the defendant-employer's] review of my application, I agree that any lawsuit or state administrative claim arising out of my employment, my application for employment, or the termination of my employment, with [the defendant] or any of its subsidiaries must be filed no more than six (6) month[s] after the date of the employment action that is the subject of the lawsuit or claim. I waive any statute of limitations to the contrary. Should a court determine that this period of time is unreasonable, the court shall enforce this provision as far as possible and shale declare the lawsuit or claim barred unless it was brought within the minimum reasonable time within which it could have been commenced. [Id. at *1].
The employer hired the plaintiff in February 2014. The plaintiff signed documents acknowledging his acceptance of the offer of employment, but those documents did not specifically reference the limitation period. During his employment, the plaintiff regularly spoke with human resources regarding purported discrimination. The plaintiff resigned in June 2021 and brought a lawsuit against the employer in August 2022. The employer moved to dismiss the claim, arguing that the plaintiff had agreed to the six-month limitation period. The trial court agreed and dismissed the motion.
The Court of Appeals affirmed. In finding that the contractual limitations period barred the plaintiff's claim, the court noted that the "'terms of an employment application constitute part of an' employment contract." Id. at *2 (citations omitted). And parties to a "contract may agree to a shortened period of limitations." Id. (citations omitted). Indeed, 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." Id. (citations omitted).
Here, the court held that the "plaintiff was hired for the job to which he applied, and, during that process, agreed to the clear term shortening the limitations period by completing the application." Id. at *3. "[T]here is no basis in this case to find that plaintiff would question whether his application materials would apply to his employment when he was hired only one month after applying." Id. Accordingly, the court found that the contractual limitations period applied and dismissed the case.
Takeaways:
- Consider including contractual limitations periods in your employment application materials. Such contractual limitations periods may bind the parties even if there is time between the application and the employee starting the role.
2. When confronted with litigation, review the employment materials to determine if there is any applicable period of limitation. If one is present in the materials, asserting it immediately will prove.
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Labor & Employment | Commercial & Business Litigation
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