Monday, August 12, 2013

6th Circuit rejects contract that shortens statute of limitations for wage claims

Twice in the last three years, the 6th Circuit has signed off on contracts between an employer and employee that shortened the time for an employee to bring a discrimination claim (here and here). 

Last week, however, that same court reversed course and refused to recognize a contractual clause that limited an employee’s right to file a wage and hour claim.

In Boaz v. FedEx (6th Cir. 8/6/13) [pdf], the 6th Circuit reviewed the following clause in an employment agreement:

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

Boaz sued FedEx in 2009—both for wage and hour violations and violations of the Equal Pay Act—that she alleged occurred between 2004 and 2008. FedEx moved to dismiss the lawsuit, claiming that the six-month limit in her employment agreement barred her claims.

The 6th Circuit disagreed:

An employment agreement “cannot be utilized to deprive employees of their statutory [FLSA] rights.” That is precisely the effect that Boaz’s agreement has here. Thus, as applied to Boaz’s claim under the FLSA, the six-month limitations period in her employment agreement is invalid.…

Congress enacted the Equal Pay Act as an amendment to the FLSA. By then the Supreme Court had already held that employees cannot waive their FLSA claims for unpaid wages and liquidated damages. We therefore presume that, by folding the Equal Pay Act into the FLSA, Congress meant for claims under the Equal Pay Act to be unwaivable as well.

FedEx argued to the 6th Circuit that this holding establishes a split among the statutory limitations periods that employers can contractually limit.

FedEx responds that courts have enforced agreements that shorten an employee’s limitations period for claims arising under statutes other than the FLSA—such as Title VII. And FedEx argues that the discrimination barred by Title VII (i.e., racial discrimination) is just as bad as the discrimination barred by the FLSA, and hence that, if an employee can shorten her Title VII limitations period, she should be able to shorten her FLSA limitations period too. 

The 6th Circuit rejected FedEx’s argument for two reasons. 

     First, unlike claims under the FLSA, employees can waive their claims under Title VII. 

     Secondly, an employer that violates the wage and hour laws gains a competitive advantage that does not exist by violating the FLSA.

Despite this case, I still believe that agreements that lessen statutes of limitations are an important tool to limit risk, especially in a state like Ohio, which has a six-year statute of limitations for discrimination claims (except age). If nothing else, you can limit your risk for discrimination and other employment claims, even if your wage-and-hour risk might carry forward longer.