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Michigan Appeals Court Upholds Limitation of Actions Clause in Handbook

By Michael Burn May 14, 2014

In a recent case, the Michigan Court of Appeals upheld the validity of a “Limitation of Actions” clause in an employee handbook, despite the fact that such statements are being aggressively attacked by the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB).

The Limitation of Actions clause in an employee handbook is a little-known and little-appreciated legal feature of fairly recent development. This language typically states that an employee agrees to bring any complaint or lawsuit within 180 days of leaving employment, or forfeits that legal right. The clause is typically placed on the handbook page where an employee acknowledges having read and understood the handbook policies, acknowledges and accepts being “at will,” and understands and agrees that the employer reserves the right to modify or edit the policies at its discretion. Its purpose is to limit the time employees legally have to bring such complaints.

The policy commonly reads as follows:

Limitation of Actions

By accepting and continuing employment with ABC Company, each employee agrees not to commence any claim, complaint, action or suit relating to his or her employment with ABC Company more than one hundred eighty (180) calendar days after the event giving rise to the claim, complaint, action or suit or later than the applicable limitation period established by statute, whichever is less.

For quite some time, this employer-friendly feature of the handbook has been under fire from the EEOC and the NLRB as well as certain courts. The EEOC and NLRB argue that Limitation of Actions statements force the employee to give up too much of his or her legal rights to due process. The EEOC has stated that it rejects this term as restricting its right to investigate breaches in the employment civil rights laws or labor laws.

Currently the EEOC is aggressively trying to establish what it sees as employee protection-consistent policies and practices toward Limitation of Actions statements. It is using as its reference point the case of EEOC v. CVS Pharmacy (Case no. 14-cv-863 BN.D. III).The CVS Pharmacy case happened to involve a severance agreement, not an employee handbook.

However, last month the Michigan Court of Appeals confirmed that such a clause will be upheld in Michigan. In Nancy Posselius v. Springer Publishing (April 17, 2014) the court upheld the Limitation of Actions clause in Springer Publishing’s employee handbook. Ms. Posselius had brought suit for gender discrimination under Michigan’s Elliott-Larsen Civil Rights Act a full year after she was terminated from the company.

In Springer’s handbook, the Limitation of Action clause resided on the acknowledgement page. Today, most employee handbooks also include language establishing that the handbook is not to be construed as a contract, and the employer reserves the right to change or edit it. Posselius argued that that statement made the Limitation of Action statement non-binding. Courts in fact have limited the power of handbook statements establishing firm reservation of rights of the employer. Arbitration agreements, common in many employee handbooks, also assert the same rights. In fact, Michigan’s case of Heurtebise v Reliable Business Computers, Inc. (1996) is a case involving an arbitration agreement.

But in Heurtebise the arbitration policy resided in the body of the handbook. Therefore, that Court ruled it was subject to the “Purpose of this Handbook” statement which said that the terms of the handbook were not to be construed as any type of contract or agreement. In legal parlance, with the arbitration policy being in the main body of the handbook and not part of the agreement statement, there could be no mutuality of obligation.

In Posselius, the Michigan Appeals Court decided that the Limitation of Actions statement, being on the acknowledgement page, was not in the handbook as such. Therefore it was validly in effect and limited Ms. Posselius’ rights to bring a lawsuit to just six months.

An employee handbook contains many important legal components that can give an employer an edge in combating adverse employment lawsuits. The Limitation of Action term is admittedly somewhat controversial and in certain cases may not be as effective as desired. But in Michigan it can still support an employer’s defense against state-derived employment lawsuits.

Source: Nancy Posselius v Springer Publishing Company, Inc. and William Springer II No. 306318. April 17, 2014.