On July 31, 2025, the Michigan Supreme Court restricted the use of limitation of action agreements by Michigan employers. For those who have not followed this issue, limitation of action agreements are used to shorten the time plaintiffs (employees) have to bring a lawsuit against the employer. The limitation of action agreement shortens the time employees have to file certain wrongful employment claims. While these claims are often allowed up to one year, or in some cases as long as three years, the agreement reduces the filing period to just 180 days from the date of the alleged incident.

In the past, limitation of action agreements were placed in the employee handbook acknowledgement statement normally signed by the employee when given the employee handbook to review. This, however, often ran into another term or clause normally at the front of the handbook that states nothing in the handbook is to be construed as an employment contract or promise of any kind. This waiver of contracts term has been used to nullify the limitation of action agreement in a handbook because the agreement to limit the due process rights of an employee must be by formal agreement. If nothing in the handbook is to be considered a formal contract term because of the waiver of contracts language, the limitations of action term would fail.

So, going forward, employers were advised to move the limitation of action agreement from the handbook and put it either in a separate agreement or on the employment application form that is signed and dated by applicants for employment.

Another challenge to enforcing limitation of action agreements is that federal agencies, including those overseeing laws like Title VII of the Civil Rights Act, have not recognized them. Likewise, certain federal appeals courts, including the Sixth Circuit Court of Appeals, have declined to uphold them. Only some state courts, such as Michigan’s, have recognized these agreements. However, it now appears that limitation of action agreements are becoming obsolete.

In July the Michigan Supreme Court ruled in the Rayford v American House Roseville I, LLC case that a limitation of action agreement in a handbook acknowledgement statement may not be enforceable because it could be what is called an adhesion contract. An adhesion contract is one that is deemed unenforceable because one of the parties who signed it had no real bargaining power and therefore the contract was deemed unconscionable and therefore unenforceable. The Supreme Court sent the case back to the lower court to determine whether the agreement in the handbook was unreasonable and an adhesion contract.

But what about having the limitation of action agreement on an employment application form? Less than a month after the Rayford decision the Michigan Appeals Court held on August 20, 2025 that a limitation of action term in an employment application could also be deemed an adhesion contract.

In the case of Daniel Paris v MacAllister Machinery Company (dba Michigan Cat) and the International Union of Operating Engineers, Local 324 (8/20/2025)(No.370857), the Michigan Appeals Court reversed a lower court’s determination on summary disposition that the limitation of action term that the employer had on its employment application was enforceable. The Appeals Court, citing Rayford, sent this case back for reconsideration on the question of whether the use of it on an employment application form was also an adhesion agreement.

So, what does this mean? In Michigan the use of limitation of action agreements, whether in the employee handbook or in some other document such as the employment application, will probably no longer be valid for most employment situations. To get around the adhesion contract assertion the employer will have to show the agreement was reasonably entered into and that the applicant/employee had bargaining power when the agreement was presented. The Michigan Supreme Court in Raymond pointed out that an applicant or employee’s choice of signing such an agreement usually comes down to a choice of signing this or you do not get the job. In the high court’s eyes this would not be a valid bargaining position.

Employers should review their employee handbooks, application forms, and other employment agreements to see if a limitation of action clause is included. They should then decide whether it is still worth keeping or consult legal counsel to explore alternative approaches that could provide valid bargaining power on this issue. Without it, employers may lose another layer of protection against wrongful employment claims.

Source: Daniel Paris v MacAllister Machinery Company (dba Michigan Cat) and the International Union of Operating Engineers, Local 324(No.370857) (8/20/2025)