Wyatt Employment Law Report

Employers’ Contractually-Shortened Statutes of Limitations May Not Be Enforceable

By Mitzi Wyrick

The Kentucky Court of Appeals and the Sixth Circuit Court of Appeals have both recently examined the issue of contractually-shortened statutes of limitations for employment claims. Both cases involved employment applications containing nearly identical statements shortening statutes of limitations to six months for any claims relating to the applicants’ employment.

In Croghan, Administrator of the Estate of Amy L. Croghan v. Norton Healthcare, Inc., et al., decided by the Kentucky Court of Appeals, the employment application stated:

I agree that any claim or lawsuit relating to my service with Norton Healthcare, Inc. or any of its subsidiaries or related entities must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit.  I waive any statute of limitations to the contrary.

Similarly, the employment application at issue in Logan v. MGM Grand Detroit Casino, decided by the Sixth Circuit, stated:

I agree that any claim or lawsuit arising out of my employment with, or my application for employment with, MGM Grand or any of its subsidiaries must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. While I understand that the statute of limitations for claims arising out of an employment action may be longer than six (6) months, I agree to be bound by the six (6) month period of limitations set forth herein, and I WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.

Both the Kentucky Court of Appeals and the Sixth Circuit found that shortening the statute of limitations to six month was unenforceable, but did so for different reasons.

In Logan, the plaintiff alleged that she had been discriminated against and retaliated on the basis of her sex in violation of Title VII. She filed a charge with the Equal Employment Opportunity Commission (EEOC) before proceeding to court as Title VII required her to do, but her charge was filed after the six-month limitation period in her employment application.

Nevertheless, Logan’s lawsuit was allowed to proceed.  The Court held that the statute of limitations cannot be contractually shortened for Title VII claims in part because Title VII has a detailed enforcement scheme requiring plaintiffs to exhaust their administrative remedies by filing a charge with the EEOC. Specifically, the Court pointed to the fact that Title VII’s pre-suit exhaustion requirement is designed to encourage cooperation and voluntary compliance as a preferred method of eradicating workplace discrimination through conciliation efforts.  Shortening the statute of limitations would remove the incentive of employers to cooperate with the EEOC.  Moreover, because Title VII contains its own limitations period in the statute itself, the Court found that contractually altering it would abrogate substantive rights and contravene Congress’ uniform nationwide scheme for Title VII lawsuits.

In Croghan, the plaintiff sued alleging age discrimination, disability discrimination, a hostile work environment, and retaliation under the Kentucky Civil Rights Act (KCRA).  There, the Court decided that the six-month limitation in the employment application, which was signed in 2008, was unenforceable due to the 2019 amendment of 336.700(3)(c).   KRS 336.700(3)(c) provides that an employer may require an employee or applicant to execute an agreement to reasonably reduce the period of limitations for filing a claim against the employer as a condition or precondition of employment, provided that the agreement does not apply to causes of action that arise under a state or federal law where an agreement to modify the limitation period is preempted or prohibited and provided that such an agreement does not reduce the period of limitations by more than fifty percent (50%) of the time that is provided under the law applicable to the claim.

The KCRA does not have its own separate statute of limitations, unlike Title VII, but instead uses Kentucky’s five-year catch-all statute of limitations.  Because the application shortened the statute of limitations by more than 50%, the Kentucky Court of Appeals found it to be unenforceable. The Court applied the statute retroactively as stated in KRS 336.700(8) and rejected the argument that KRS 336.700 could not be applied retroactively because it impaired the obligation of contracts in violation of Section 19 of the Kentucky Constitution.

And even though plaintiffs pursuing claims under the KRCA are not required to exhaust their administrative remedies unlike Title VII, the Court of Appeals stated that the six-month limitation would not be reasonable because it did not provide the Kentucky Commission on Human Rights (KCHR) enough time to investigate claims.

Employers should reexamine any contractual limitations periods in employment applications to make certain that they are sufficient under KRS 336.700(3)(c).  Generally, this means that the period for filing claims must be at least two and a half years.

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