Sixth Circuit Upholds Contractual Statute of Limitations Clause Covering Discrimination Claims

The United States Court of Appeals for the Sixth Circuit has now approved for publication its previously unpublished opinion in Thurmon v. DaimlerChrysler, Inc., 397 F.3d 352 ((6th Cir. 2004), in which the court addressed the validity of a statute of limitations clause in an employer’s job application form.

Facts:

Plaintiff’s job application contained a clause stating:

I agree that any claim or lawsuit relating to my service with Chrysler Corporation or any of its subsidiaries must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.

The clause was preceded by the statement, “READ CAREFULLY BEFORE SIGNING,” in bold and capitalized letters. The application also contained a clause stating: “This application will be considered active for twelve (12) months from the date filed. If you are hired, it becomes part of your official employment record.”

Plaintiff, a black female, signed the application, acknowledging that she read and understood it. Although plaintiff was covered by a collective bargaining agreement, nothing in that agreement expressly addressed statute of limitations issues. Plaintiff began working for DaimlerChrysler in November 1994, about 13 months after she submitted the job application.

On September 9, 1999, plaintiff and one Pittman, a co-worker, were engaged in a conversation when plaintiff excused herself to attend a meeting. As she did so she bent over to pat Pittman’s shoulder, and Pittman, misunderstanding her gesture, grabbed her left breast. The DaimlerChrysler Labor Relations Staff investigated and concluded that there was insufficient evidence to punish Pittman. On September 29, 1999, plaintiff filed a statement of concern with the Michigan Department of Civil Rights claiming harassment owing to the conduct of Pittman. A few days later, while plaintiff was in the cafeteria eating lunch with coworkers, Pittman, as he was leaving the cafeteria, walked by plaintiff and grabbed his crotch, shaking his genitals at her. Plaintiff reported this incident to her superiors, and this time Pittman was given a 10-day suspension for violating the DaimlerChrysler Standards of Conduct. Plaintiff, for her part, filed criminal charges against Pittman. After being transferred to another shift in January 2000, plaintiff took a leave of absence on February 26, 2000, and did not returned to active duty.

Plaintiff ‘s first suit, filed in federal court, was dismissed without prejudice, and her second suit, filed more than 6 months after she left the company, was filed in state court and removed to federal court. Her suit charged DaimlerChrysler with violations of the Michigan Elliot Larsen Civil Rights Act, Title VII and 42 U.S.C. Section 1981 and asserted various state law tort claims against Pittman. The District Court granted summary judgment in favor of DaimlerChrysler and Pittman relying on the abbreviated limitations agreement as to DaimlerChrysler and on Michigan’s statute of limitations as to Pittman.

The Decision:

Plaintiff first argued that because she was hired more than 12 months after she submitted the job application form, and because the form provided that it would be “considered active for twelve (12) months from the date filed,” it had expired by its terms and thus the statute of limitations provision could not be enforced. The Court of Appeals, however, pointed to the language in the application: “If you are hired, [the application] becomes part of your official employment record.” The Court ruled: “Given the fact that DaimlerChrysler hired plaintiff based upon the application she filled out and that the application became part of her employment record, it cannot be argued that the application expired prior to her hiring.”

Next, the Court addressed plaintiff’s argument that the collective bargaining agreement, which contained no limitations period, superseded the abbreviated limitations period set forth in the job application form. Specifically, plaintiff relied on a clause in the collective bargaining agreement providing “[i]t is the intention of the parties that this agreement during its term shall cover all arrangements between the parties concerning wage, hours, and conditions of employment.” The Sixth Circuit concluded, however, that “[I]ndividual employment contracts are not inevitably superseded by any subsequent collective agreement covering an individual employee….”, quoting, Caterpillar Inc. v. Williams, 482 U.S. 386, 396 (1987), and noted that the collective bargaining agreement at issue expressly reserved DaimlerChrysler’s right to manage its employees and direct its affairs, “except as limited by the terms of th[e] Agreement….” Noting further that a statute of limitations is only a “permissive” rather than a “mandatory” subject of collective bargaining, the Court concluded that 6-month statute of limitations contained in the employment application was not superseded by the collective bargaining agreement.

Finally, the Court of Appeals rejected plaintiff’s argument that the 6-month statute of limitations clause was unenforceable because it was an unconscionable contract of adhesion. The Court ruled that state law, in this case the law of Michigan, controlled the issue and that under Michigan law courts will not invalidate contractual provisions, including statutes of limitations provisions, as adhesion contracts where the challenged provision is reasonable. The Court noted that under Michigan law an abbreviated limitations period within an application for employment “is reasonable if (1) the claimant has sufficient opportunity to investigate and file an action; (2) the time is not so short as to work a practical abrogation of the right of action; and (3) the action is not barred before the loss or damage can be ascertained.” The court applied this standard without discussing the fact that the case before it involved federal as well as state law claims.

In holding that in the present case the 6-month limitations period was reasonable, the Court ruled that plaintiff had had “ample time to investigate her claim and determine her damages,” as evidenced by the fact that she had filed her first lawsuit within the abbreviated limitations period, had been referred to medical and psychological treatment one week after the first incident with Pittman, had filed a complaint with the Michigan Department of Civil Rights on September 29, 1999 and had filed a criminal complaint against Mr. Pittman on October 20, 1999. In addition, the Court ruled that plaintiff signed the form knowingly and voluntarily. Although the limitations provision did not appear in bold type in the application form, it appeared in a section of the form bearing the heading “READ CAREFULLY BEFORE SIGNING,” a fact which, the Court concluded, sufficiently brought the provision to plaintiff’s attention. In this regard, the Court ruled that the limitations provision was unambiguous on its face and pointed to plaintiff’s deposition testimony wherein plaintiff acknowledged that she had actually read the form before signing it and did not have any concerns about it.

The Court, did, however, reverse the District Court’s grant of summary judgment in favor of Pittman on plaintiff’s state law claims against him. The Court noted that the District Court had not applied the appropriate limitations period on those claims and that, in any event, the District Court lacked supplemental jurisdiction over those claims once the federal claims against DaimlerChrysler were dismissed. Implicit in the Court’s ruling is that the abbreviated limitations period in the employment application did not apply to the claims against Pittman. The Court ordered those claims to be remanded to state court for further proceedings.

Conclusion:

The utility to an employer of an abbreviated limitations period provision would seems obvious. An employer considering adopting such a provision should take care, however, to make sure that any such provision meets the requirements of the law of the state where the employees in question are employed. Moreover, it would appear that such provisions would be subject to challenge as unreasonable under the circumstances on a case-by-case basis.