The Court of Appeals recently upheld a provision in an employment contract that limited an employee’s ability to bring a claim against the employer after one-year. Sams v. Common Ground (Unpublished, Case Number 329600, decided January 17, 2017).
In Sams, the terms of an employment contract prohibited claims against the employer after 1 year of either the action giving rise to the lawsuit or the employee’s termination, whichever came earlier. About two and a half years after the employee resigned from his position with the employer, he attempted to bring a lawsuit against the employer for violation of the Persons with Disabilities Civil Rights Act. Under Michigan law, the Statute of Limitations for a claim under the Persons with Disabilities Civil Rights Act is three years. However, the time period provided by the employment agreement of one year had already passed.
Prior to trial, the trial court dismissed the employee’s claims, finding that the provision in the employment contract limiting the time period for bringing a claim against the employer was valid and enforceable. The Court of Appeals upheld the trial court’s decision on appeal. In doing so, the Court of Appeals noted that an unambiguous contractual provision is to be given full effect unless the provision violates law or public policy, or a traditional contract defense, such as unconscionability. Because the Court of Appeals did not find that the provision in this case which shortens the Statute of Limitations for employment discrimination violates any of those items, the Court of Appeals found that the provision was enforceable.
Businesses should note that the use of language limiting the period of time for employees to bring claims against them may help protect the business from unforeseen claims by employees who have long since terminated their relationship with the business.
Demorest Law Firm has drafted protective employment agreements for many Michigan businesses.