Several weeks ago we wrote about how a limitation of actions agreement/clause can effectively restrict state wrongful employment actions to a much shorter period of time – normally 180 days. It is recommended a limitation of actions clause not be included in the employee handbook. They can be placed on an employment application form in its boilerplate text section normally just above the signature and date lines, or it can be a separate agreement signed at the point a job offer is made.

As a reminder as to what this clause or agreement does, most employment related laws have a statute of limitations term that states how long a person that believes they may have suffered an adverse employment cause of action, may bring charges. Keep in mind a limitation of actions clause may not be recognized by some federal agencies and courts. However, Michigan courts do recognize a limitation of actions clause if done correctly as we outlined in our previous ETPW article. If improperly set up, a limitation of actions clause/agreement will fail as we see in the case Mohamed v. Brenner Oil Co. that was decided February 21, 2019 (No.341899).

The Michigan Appeals Court, in reviewing a lower court’s decision to grant the defendant-employer summary disposition against the plaintiff-employee, held the limitation of action clause was incorrectly agreed to through the employer’s employee handbook. What happened?

Plaintiff-employee Mohamed brought suit against his employer alleging race, national origin, and religious discrimination under Michigan’s Elliot Larsen Civil Rights Act (ELCRA). The trial (lower) court held that because defendant-employer’s employee handbook contained a limitation of actions clause limiting lawsuits to 180 days, and plaintiff-employee brought his suit outside the 180-day limitation period, summary disposition for the employer was warranted.

On appeal, the Michigan Appeals Court reversed the lower court’s holding for defendant-employer. The reason? The Appeals Court found that the employer’s employee handbook, as do most employee handbooks, also contained a contract disclaimer clause. What is that? The contract disclaimer clause typically resides at the front or beginning of a handbook and states that “the Policies specified herein do not create any employment or personal contract, express or implied,” and that the employer has the right to change the company’s policies in the handbook “at its sole discretion.”  

The Appeals Court applied contract principles to both sides of the employer’s handbook text. First, the Court recognized that the employers’ limitation of action clause in the handbook would have otherwise created a valid contract to limit causes of action. However, with the clearly stated contract disclaimer, the court found that the clause negated any contract made because of the clearly stated intent that nothing in the handbook would constitute a contract.

As we have previously advised employers in our articles on handbook development, an employer wishing to effectively use a limitation of actions agreement needs to make sure it is not placed in an employee handbook that otherwise disclaims the handbook and its policies as a binding contract. Employers are normally advised to use the contract disclaimer clause in their handbook to maximize discretion applying the many policies contained in their employee handbook and avoid being locked into terms intended to have flexibility.

Additional ASE Resources
ASE Handbook Development - If you need assistance pulling your limitation of actions term from your handbook or would like yours reviewed, please contact Mike Burns.

Source: FAWZY MOHAMED, Plaintiff-Appellant BRENNER OIL COMPANY, LC No. 17-140337-CD Defendant-Appellee, UNPUBLISHED February 21, 2019 v No. 341899 Monroe Circuit Court