Michigan Upholds 180-Day Limitation of Actions Clause

By Michael Burns, courtesy of SBAM Approved Partner ASE

In ASE’s Designing Employee Handbook class as well as other EPTW articles we tell employers to be careful with limitation of actions clauses. A limitation of actions clause is used to reduce the amount of time an employee has to bring a wrongful employment action against an employer – usually down to just 180 days from the wrongful employment act.

Limitation of action clauses used to be placed in employee handbooks. However, because the limitation of actions clause is considered a term of employment they have to be formally agreed to. Many employee handbooks also contain disclaimers of contract clauses that notify employees that the handbook and its policies are not to be considered a contract of any kind. This rendered a limitation of actions clause in the handbook as ineffective.

Further restrictions on the use of limitation of action clauses come from the federal side of employment law. Many federal courts, including the Sixth Circuit Court of Appeals, do not recognize a restriction on the time a person can bring a wrongful employment lawsuit that is less than what the federal law itself provides – usually at least 365 days. Many federal employment agencies that enforce laws such as the National Labor Relations Act (NLRB) and the Equal Employment Opportunity act will disregard a limitation of actions clause as contrary to law.

So, when and how can a limitation of actions clause be used? Michigan law recognizes limitation of action clauses if they are used appropriately. For years ASE has advised our members to place a limitation of actions clause in the application for employment form. Most employment applications have boilerplate language on the last section of page of the application. This boilerplate language usually states the applicant agrees to release former employers to provide references about the employee. It states the at-will employment relationship as well as other terms that the employer wants the applicant to understand upfront. As with most all employment applications, the applicant will sign and date the application form. The limitation of actions term can also be stated in a separate agreement signed by the employee.

Once again, Michigan has upheld its recognition of an employer’s properly executed limitation of actions clause. In Raynard Cann v Elite Plastic Products a former employee sued their employer for wrongful termination. The employer used its limitation of actions clause it had on its employment application form to defend itself stating that Plaintiff brought his suit far beyond the 180-day limitation stated in the employer’s limitation of actions clause.  Despite the Plaintiff’s legal counsel’s technical arguments to avoid the limitation of actions clause, the Michigan Appeals Court upheld its 180-day limit. The Court’s review of the employer’s limitation of actions clause found that it was reasonable in length of time and clearly stated on the application and agreed to as evidenced by the Plaintiff’s signature below the limitation of action term in the application’s “boilerplate.”

Despite the seemingly innocent nature of a limitation of actions clause in Michigan and despite the fact a limitation of actions clause will not help an employer in federal court or with federal agencies, every year or so another case comes down where the limitation of actions clause saves an employer from an untimely brought lawsuit.

ASE recommends employers use this clause and place it either in their employment application or as a separate agreement that all employees must sign. You never know when something this simple can get you out of legal trouble.

The following is a sample limitation of actions statement: