Federal employment discrimination claims have fairly limited statutes of limitation, e.g., a plaintiff typically must bring a charge of discrimination before the EEOC or state Fair Employment Practices agency no later than 300 days after the last occurrence of prohibited conduct. But some state law claims have much longer statutes of limitation, and federal discrimination claims brought under 42 USC §1981 can be filed 4 years after the discrimination occurred. Fair Labor Standards Act claims are similarly lengthy, typically reaching back 2 or 3 years, depending on the nature of the violation.
Obviously, it's to the advantage of the employer to limit the length of time allowed to an employee to file suit. Employment evidence is ephemeral--payroll and evaluation records vanish, people get fired or retire, and critical electronic evidence disappears or is erased. Moreover, back and front pay liabilities become more significant the longer the claim languishes, and these delays can limit the ability of employers to take remedial action to limit damages.
It comes to a surprise to many employers that it's sometimes possible to limit the statutes of limitation through the simple expedient of using an employment agreement. A recent example is found here, in a Sixth Circuit case involving a USERRA claim (sidenote – given my background, I am highly sympathetic to USERRA claimants, and I am in this case).
The plaintiff here was terminated shortly after he returned from a one-year tour with his Marine unit in Iraq. Although he filed a claim with the US DOL for investigation under the statute, he did not file his wrongful termination lawsuit until almost 3 years after he was fired.
His former employer moved to dismiss the case based on an employment agreement between the parties that specifically stated that any lawsuit arising out of employment, including federal civil rights claims, had to be brought within 180 days of the event giving rise to the claim. The district court agreed with the employer and dismissed the case.
Most of us who practice in this field would have some serious concerns with this ruling for at least two reasons. First, USERRA contains specific language that says that its terms supersede any contract that “reduces, limits, or eliminates in any manner any right or benefit” provided under the law. That would seem to eliminate the ability of an employer to reduce a statute of limitations (please note that the claim in this case came before USERRA was amended to specifically state that there would be no limit on time to file a USERRA claim). Second, courts in general have been reluctant to limit a civil rights plaintiff’s ability to file a case based on a contractual modification; frequently employment agreements are viewed as contracts of adhesion because of the significant advantage in bargaining power that the employer has at the time the employment starts.
But the Sixth Circuit approved the dismissal of the soldier’s case. It determined that absent a specific statutory provision, a contract can validly limit the time for bringing a lawsuit to a period less than that laid out in a general statute of limitation, as long as it is reasonable. The court noted that 6 months (the provision on employment agreement) was certainly reasonable. The court then determined that the specific USERRA provision superseding contracts applied only to substantive USERRA rights, e.g. compensation, reinstatement, etc., and not to procedural rights such as statutes of limitation. In other words, even though the employee might have believed he had 4 years to file his complaint, the contract he signed limited him to 6 months, and no more.
As I noted above, USERRA has been amended so that an employer can not limit a statute of limitations with respect to reemployment or discrimination claims under that particular law. But there are other statutes that do not contain language prohibiting a shorter period of limitations. Employers should consider language in all of their employment agreements providing for a short, but reasonable, time in which to bring any type of employment claim.