Quick Hits

• The Michigan Supreme Court recently ruled that contracts restricting how much time employees have to sue their employer must be examined for reasonableness.
• In Rayford v. American House Roseville I, LLC, a nursing assistant alleged harassment, retaliation, and other legal violations almost three years after the claims accrued.
• Her employment contract included language mandating that any employment lawsuits be filed within 180 days.

Background on the Case

American House Roseville I, a nursing care facility, hired the plaintiff, Timika Rayford, as a certified nursing assistant in February 2017, and she signed an employee handbook acknowledgement form.  The form included a limitation period of 180 days for bringing any lawsuit arising out of employment. Rayford said that she reported to the company’s HR division and the state of Michigan inappropriate sexual conduct between upper management and other nursing assistants that she said she had witnessed.

On July 1, 2017, the employee finished her shift and realized that she had left her purse in a locked room. The next day, she allegedly discovered that her purse had been stolen. She reported the alleged theft to her employer and the police. The nursing care facility accused the employee of lying and terminated her employment on July 7, 2017.

The employee sued the nursing care facility in May 2020, claiming harassment, retaliation, hostile work environment, wrongful discharge, malicious prosecution, and abuse of process. She alleged violations of the Elliott-Larsen Civil Rights Act, which prohibits discrimination based on race, sex, and other characteristics.

The employer argued that because the employee filed all the claims almost three years after they accrued, all of her claims were barred by the 180-day contractual limitation period. The employee argued the contract limitations were unconscionable and unenforceable partly because the employer did not provide her the acknowledgment form, in violation of Michigan’s Bullard-Plawecki Employee Right to Know Act.

 The Michigan Court of Appeals ruled in favor of the employer in December 2021. It concluded the contract was not unconscionable or unreasonable. It found the employee failed to plead facts supporting an abuse-of-process claim.

Michigan Supreme Court Ruling

The Michigan Supreme Court overturned the lower court’s decision and remanded the case to the lower court for further proceedings on procedural and substantive unconscionability.

“While contractually shortened limitations periods are generally permitted, they require close judicial scrutiny before enforcement when the contract is an adhesive, non-negotiated boilerplate agreement between an employer and an employee. A shortened limitations provision contained in such an agreement must be examined for reasonableness,” the Michigan Supreme Court stated.

For contractually shortened limitations period, the reasonableness test requires three things:

• “that the claimant have sufficient opportunity to investigate and file an action,”
• “that the time period not be so short” as to practically prevent the right of action, and
• “that the [right of] action not be barred before the loss or damage can be ascertained.”

Next Steps

Employers in Michigan may wish to review their employment contracts to ensure that any time limitations on claims are reasonable and adhere to local, state, and federal laws. Some employment contracts may be considered unconscionable by courts, particularly if a party lacks bargaining power when offered a boilerplate agreement with a shortened period of limitations clause.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.