What is a statute of limitations agreement? In the employment context, this is an agreement between the employer and employee that states the employee agrees to bring any claims against the employer within a specific period of time after employment.

It is intended to shorten the time whereby a legal complaint may be brought against an employer from either what the relevant statute or common law rule may permit. The limit usually agreed to is 180 days.

In Michigan if the person fails to bring the lawsuit within 180 days after employment termination, this may get the case against you dismissed on summary disposition. (At this point if you are not interested in the history and minutia of limitation of action clauses you may want to skip to the end – What Does This Decision Tell Employers).

Background on Limitation of Action Agreements

As ASE has written about in the past, use of a statute of limitations agreement in the employment context is pretty limited but still can protect the Michigan employer. Federal employment agencies such as the EEOC, NLRB, and U.S. Department of Labor do not generally recognize reduced time limitations privately agreed to between an employer and an applicant or employee. Federal courts such as our own Sixth Circuit Court of Appeals do not recognize it either. However, Michigan Courts do. Employers that have had legal action taken against them for State wrongful employment actions have had lawsuits dismissed if filed beyond the limitation of actions agreement period.

In the past, employers have placed this statute of limitations agreement in their handbook. But most handbooks also contain a waiver of contractual agreement in the employee handbook. This would negate the limitation of actions agreement if it was only contained in the handbook. So, these days we recommend a statute of limitations agreement be signed separately or be included on the employment application form in the boilerplate above where the employee signs and dates the application form.

And here is where a Michigan Supreme Court decision early this month throws a new twist at employers using a limitations of actions clause on their employment application. In the case of Lakisha McMillon v. City of Kalamazoo, the Plaintiff filled out an employment application for a position the City of Kalamazoo offered in 2004. She was not hired for that position but a year later she was hired by the City for another position. She was not asked, nor did she complete a new application form for that job. The City decided to cut a corner and use the 2004 application she signed as the application for this new position that Ms. McMillon took with the City.

Fourteen years later Plaintiff-McMillon sued the City alleging discrimination. The City attempted to have the case thrown out because the claim was brought against the City well past, in this case, the nine-month limitation on legal action against the City that was in the limitation of actions clause in the 2004 employment application. Both the trial court and the Court of Appeals held for the Defendant-City and its statute of limitations clause in that original employment application form. The Supreme Court, however, said there was a problem with this.

The Supreme Court found by applying basic legal contract principles to the fact that Plaintiff had signed the original 2004 employment application for a position she was not ultimately offered, that the employment and the application and its limitations of action clause could not be relied upon as establishing that she continued to agree to that clause for the new position a year later. The Court believed that there may not have been mutuality of agreement and without that there could be no limitation of action agreement to prevent the Plaintiff from bringing her discrimination lawsuit. The Court sent the case back to the lower court for determination on that question.

What Does This Decision Tell Employers?

Limitation of action agreements will not help you under most federal employment laws, and enforcement agencies such as the EEOC and NLRB do not like them either. They will look to the federal laws’ limitation terms. This term does work under Michigan law, however.

Second, employers need to treat each job offer as its own for employment/re-employment. If an applicant is turned down for one position do not use old application forms or any other forms requiring the contractual consent that may have been previously signed off on if an applicant returns to apply for a new position. Have the applicant start over and complete and sign off the application form and any other documents/forms with agreement language in them. Do not cut corners and use forms completed for previous job offers.

Lastly, do not put the limitation of actions term as an employee handbook policy. It may be negated by the handbook’s contract waiver language usually found in the About this Handbook or Purpose of this Handbook statements.

Source: Lakisha McMillon v City of Kalamazoo. Case 162680 (1/11/2023)