Defending Discrimination LawsuitsA recent Michigan Court of Appeals decision highlights the important role employment agreements can play in defending against employment discrimination lawsuits.

Specifically, in Sams v Common Ground, when William Sams was hired by Common Ground he signed an employment contract. In that contract, Sams agreed that he would not sue the company one year after his employment ended and that waived any statute of limitations to the contrary.

Federal and Michigan employment laws are subject to statutes of limitations. For example, the statute of limitations for Michigan’s Persons with Disabilities Civil Rights Act (MCL 37.1101 et seq.) is three years. A statute of limitations refers to the time frame an individual has from the date the alleged action occurred to the date that a lawsuit must be filed. If a lawsuit is not filed within the statute of limitations, it will be barred.

Despite this agreement, Sams later sued Common Ground 2½ years after his employment ended. Sams seemed to argue that because his position and job duties had changed after signing the contract, it no longer applied. The court rejected this argument noting that while his job conditions were altered, his employment with the company never ended. Thus, his original contract applied to the new position.

The Court also reaffirmed well-established Michigan law that an employer and employee may alter the statute of limitations that would normally apply to a discrimination claim. This includes shortening the time a plaintiff has to file a discrimination lawsuit. Only in limited circumstances will a court not enforce such an agreement. Examples include where the shortened limitation violates the law, public policy, or where traditional contract defense, such as unconscionability, may exist.

Employer Considerations – First and Best Line of Defense

From a company perspective, shortening the statute of limitations should be a no-brainer. The longer an employee’s statute of limitations is, the larger the window your company is exposed to liability. Obviously, it is smart business to decrease risks wherever possible. And it is an inexpensive line of defense to later attack an untimely discrimination lawsuit. It is important, however, to have your employment agreements reviewed by experienced legal counsel to avoid having it later be invalidated.

For example, agreements to shorten the statute of limitations may raise different issues under federal anti-discrimination laws. The Equal Employment Opportunity Commission, for instance, has challenged shortening of the limitations period for federal claims as unlawful.

Employees – Know when the clock runs out

For individuals who may have been discriminated against, consider whether you are “on the clock,” regarding when you must sue or pursue a discrimination charge. On this point, we’ve seen instances where our clients – employers and employees – agreed to shorten a statute of limitations down to as little as six months. And sometimes, this agreement was buried in the fine print of an application that was likely overlooked or forgotten by the employee.

For more information about reviewing your company’s employment agreements and policies, contact employment attorney Jason Shinn. Since 2001, he regularly assists employers and management in complying with federal and Michigan employment laws, as well as investigating employment discrimination claims or defending against them in federal or Michigan courts.