One of the more esoteric areas of employment law is the use of limitation of action clauses in handbooks and other employment documents. A limitation of action agreement, as the name suggests, limits the amount the time in which an employee may bring some sort of wrongful employment claim against the employer – a sometimes handy tool.

This type of agreement shortens the time an employee has to file a civil complaint compared to what the law or common law might allow. While certain laws may permit filing anywhere from one year to three years or more after the alleged incident, these agreements often reduce that window to 180 or 182 days. The two-day difference isn’t particularly significant, and this shorter timeframe is generally considered reasonable for employers to request and employees to agree to when setting limits on when a complaint or lawsuit can be filed.

Many employers include this provision in their employee handbook, but it can conflict with another clause often found in the same document – a waiver of contractual obligations. This waiver is typically located in the opening section, often titled “About This Handbook” or “Purpose of This Handbook.” In that section, the policy usually states something along the lines of: “This handbook is intended to explain the terms and conditions of employment for all employees and is not a promise or contract of employment, nor does it create any contractual obligation.” Variations of this wording convey the same intent.

First, because an employer is requesting a shorter (limited) term to bring a legally allowed lawsuit against them, the employer needs the applicant or employee’s legal permission as evidenced by a formal agreement. If the limitation of action term is in the handbook and requires formal assent, then this cannot be agreed to in a handbook that states nothing in it is to be considered a contractual obligation of any kind. [Lawyers, am I right?]

There are also further concerns about using a limitation of action term at all. They are not favored by many federal agencies as well as Michigan’s own Sixth Circuit Court of Appeals. So, if an employer wants to use a limitation of action clause when a typically, now former employee, brings a complaint beyond 182 days, federal regulatory agencies such as the EEOC, NLRB, and the U.S. Department of Labor have often ignored that limitation of action agreement and taken the complaint anyway. The Sixth Circuit Court of Appeals has also walked legally past these agreements as well. So why have it at all?

Michigan courts have upheld limitation-of-action clauses when they are properly agreed to. This means that if a complaint is filed under Michigan law and the employer has such an agreement in place, the employer may, and in some cases has, successfully obtained a summary disposition to dismiss the lawsuit because it was filed after the 182-day period agreed to by the employee.

If the limitation of action clause is not included in the employee handbook, one recommended approach is to place it in the “boilerplate” section at the end of a standard employment application. This section typically contains various terms applicants agree to when applying for a position, which become binding once the application is signed and dated. Another option is to present the clause as a separate agreement for the employee to sign and date, outside of the handbook. Either method can create a legally enforceable agreement.

Next week, we’ll explore a recent Michigan Supreme Court ruling and how it may impact the enforceability of these clauses. In Rayford v. American House of Roseville I LLC dba American House East I and American House (No. 163989, 7/31/2025), the Court weighed in on this issue, and its decision could significantly affect employers’ ability to use limitation of action terms in Michigan. This case raises the bar for enforcing limitation agreements, challenging their validity if they are not freely negotiated and are simply presented as boilerplate. In effect, this creates a higher standard for using limitation of action clauses and merely including them in a handbook or even an application form may no longer be deemed “reasonable.” Since the Supreme Court has remanded the case to the lower court for reconsideration, a definitive outcome is not yet available.

As they used to say on TV, “Stay tuned and join us next week for the exciting conclusion of Michigan Supreme Court Works to Further Restrict Limitations of Action Employment Term.”

ASE Connect

ASE Handbook Services - ASE can provide employee handbook review or update. If an organization does not have an employee handbook yet, ASE can develop a complete employee handbook customized to your organization’s policies and practices. If you have a handbook, we can review it for compliance as well as layout for ease of reading. For information about ASE employee handbook review and development services contact Michael Burns.