Limitation of Action Agreements are a contract between the employer and employee, usually agreed upon at the start of employment or even before on the application form, whereby the employee agrees they will not bring a wrongful employment lawsuit against their employer typically beyond 180 days of the cause of action. This shortens the time an employee can bring a wrongful employment lawsuit against their employer from what the statute or common law may ordinarily provide them.

These agreements are enforceable in Michigan. Although, they are often found unenforceable in federal court and ignored by many federal regulatory agencies such as the Department of Labor, the Equal Employment Opportunity Commission, and the National Labor Relations Board. So, they are not as effective against lawsuits outside of Michigan law.

If so many institutions will not enforce a limitations agreement, why have one? Because Michigan Courts continue to recognize these agreements as valid. Belle Tire Distributors just won such a case last month. Steven Joslin v. Belle Tire Distributors, Inc. No.255145 (3/21/2024).

In this case the Plaintiff was fired by Belle Tire in April of 2021. He filed his lawsuit against Belle Tire in August of 2022 – a full 14 months after the termination. At the start of his employment with Belle Tire, Plaintiff had signed the company handbook and other agreements that contained a 180-day limitations agreement and also an agreement to arbitrate claims instead of bringing a lawsuit.

The lower court granted summary disposition in favor of Belle Tire, and in the decision handed down last month, the Michigan Appeals Court upheld that decision finding that the claim against Belle Tire was time-barred by the shortened time period in the two agreements.

What did the Belle Tire limitations agreements state?

One stated:

“As a condition of employment or continued employment, unless otherwise provided for by law, I agree not to file any action or suit relating to my employment more than 180 calendar days after the event and/or employment practice or action complained of including, but not limited to, employment termination and discrimination claims, claims for wages, salary, commissions, or expenses, and to waive any state or federal statutes of limitations to the contrary.”

The second one stated:

“Limitations of Action: I agree that any claims or suits that I may have against the Company, its directors, officers or employees (past, current or future) arising out of my application for employment, employment, or termination from employment, including but not limited to claims arising under state or federal employment or civil rights statutes must be brought within the following time limits or be forever barred: (a) for claims requiring a Notice of Right to Sue from the EEOC, within ninety (90) days after the EEOC issues that Notice; or, (b) for all other claims, within (i) one hundred eighty (180) days of the event(s) giving rise to the claim, or (ii) the time limit specified by the statute, whichever is shorter. I knowingly and voluntarily waive any limitation periods that exceed this time limit.”

It's pretty clear, and the Michigan Appeals Court ruled for Belle Tire because of it. In this case, the limitations of actions agreements were worth it.

But employers seeking to use them should know to not rely on just an employee handbook recitation of the limitation agreement. Often if not more times, employee handbooks have a waiver of contracts term at the opening of the handbook that states “nothing in the handbook is to be construed as a contract for employment or other promise.” Because a limitation of action term must be agreed upon in writing, a limitation of action clause as a handbook policy would not hold up against the waiver of contracts term stated in most handbooks.

Check your employee handbook for this waiver. It is usually (not always) upfront in a Purpose of this Handbook or About this Handbook statement. If you do not have this waiver, you may want to consider adding it to your handbook for other important egal purposes. Check with qualified legal counsel though.

Second, the limitation of action clause can be placed in the employment application as a term contained in the application’s boilerplate. Usually on the back or last page of an application form. Because the employee (applicant at that point) has to sign and date the application this will normally ensure a formal limitation agreement is in place. To be really sure this term is properly executed, employers may want to have the new employee sign a separate/stand-alone limitation of action agreement document.

With Belle Tire, they had the Plaintiff sign more than just their employee handbook, probably because the handbook had a waiver of contract term in it. Though the case decision does not make this clear, they do state the Plaintiff signed contracts (plural) and this was most likely done to ensure the limitation agreement was properly executed – which in turn allowed them to win this case.

Source: State of Michigan Court of Appeals Steven Joslin v. Belle Tire Distributors, Inc. No.255145 (3/21/2024).