Contract-Documents.jpgEmployers often overlook the opportunity to limit liability against their business when it comes to employment agreements. And one of the most common ways in which a business can limit its liability is through a contractual limitations period. A recent Michigan Court of Appeals highlights this point.

Specifically, a shortened limitation period in an employer’s policy handbook barred a plaintiff’s lawsuit for wrongful discharge in retaliation for filing a workers’ compensation claim. (Hier v. Douglas J. Management LLC (9/15/2015). In this case, Plaintiff was injured at work in February 2011 and received worker’s compensation benefits. She was later terminated.

Plaintiff claimed she was wrongfully terminated because she asserted her rights under the Worker’s Disability Compensation Act (WDCA), MCL 418.101 et seq. In response, the employer relied upon its employee manual, which provided that an employee must commence “any claim, complaint, action or suit relating to their employment with the Company” within 182 days of the event “giving rise to the claim, complaint, action, or suit.”

The Court took a very “employer friendly” view for determining when the clock began to run on Plaintiff’s claim. Specifically, the Court concluded the “event” giving rise to Plaintiff’s claim, i.e., the day on which Plaintiff’s claim for retaliatory discharge accrued, occurred on July 26, 2011, when she was allegedly terminated. Plaintiff filed her lawsuit on June 26, 2013, which was more than 182 days after July 26, 2011. Further, the Court rejected Plaintiff’s argument that she complied with the contractual limitations period based on the worker’s compensation application that was filed on July 18, 2011 (eight days before the alleged termination of her employment), which was within 182 days of her injury.

The Take-Away

All employment related claims are subject to limitations period established by statute, i.e., the time period in which an employee must take legal action, which is often measured from the time the injury or events giving rise to the claim occurred. In Michigan, this may be as short as 90 days in the case of a claim under the Whistleblower Protection Act Claim or Worker’s Disability Compensation Act. In contrast, employees have a three year statutory limitation period for bringing actions alleging employment discrimination in violation of the Michigan Civil Rights Act.

But, as the above case illustrates, employment agreements can call for a shorter limitations period for many – but not all – employment-related claims.  It is critical to discuss with your employment attorney what claims may be shortened and what shortened limitation period will likely be acceptable to a court.

Also, as an aside, the case discussed above referenced the employer’s limitation period as being in an employee handbook. As a general strategy, I strongly recommend companies avoid using an employee manual or employee handbook for the source of contractual limitations or other provisions that the employer may want to enforce.

The reason for this strategy is that often such manuals contain language expressly noting it is not an enforceable contract. And under Michigan law, provisions in a handbook will not create enforceable rights if the manual provides it is not intended to create an employment contract. In fact, earlier this year, we used this argument to successfully defeat a motion to dismiss brought by the defendant employer against its former manager in a pregnancy discrimination lawsuit.

In that particular case, the employer’s manual specifically provided, “I understand that the associate handbook is not an employment contract but does provide an overview of [Company’s] employment guidelines and procedures.” Without that argument, our client’s pregnancy discrimination claim was able to proceed. On the other hand, a well-drafted limitation period could have allowed the employer to avoid costly litigation.

This also brings up another important point for employees; Waiting to contact an attorney may jeopardize your legal claims if there is a shortened statute of limitations period buried in your employment agreement or employee manual.

For more information about improving your company’s employment agreements and HR operations, contact employment attorney Jason Shinn. Since 2001, he has worked with employers to comply with federal and Michigan employment laws, as well as implementing HR best practices for avoiding or limiting HR-related risks.