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October 4, 2019

Federal Appeals Court Strikes Down Contractual Limitation Period for Title VII Claims

On September 25, 2019, in Logan v. MGM Grand Detroit Casino, the US Court of Appeals for the Sixth Circuit tackled what it characterized as a matter of first impression––that is, whether the statute of limitations applicable to claims under Title VII of the Civil Rights Act of 1964 (Title VII) could be contractually shortened for litigation.

Emphasizing that Title VII’s limitation period is “part of an elaborate pre-suit process that must be followed before any litigation may commence” and that contractual alterations of that process “abrogate substantive rights and contravene Congress’s uniform nationwide regime for Title VII lawsuits,” the appellate court invalidated a contractual provision shortening the time within which an aggrieved employee could sue their employer.

In Logan, the plaintiff was a former culinary utility worker for the defendant casino operator. As part of the application process and as a condition of employment, the plaintiff agreed that a six-month limitation period would apply to any claim or lawsuit arising out of her application for or her employment with the casino operator. After over seven years of working for the casino operator, the plaintiff resigned, alleging that she was constructively discharged due to impermissible gender discrimination. She then filed a charge with the federal Equal Employment Opportunity Commission (EEOC). After the EEOC investigated her allegations, it issued her a right-to-sue letter, and she commenced a federal lawsuit. That lawsuit was initiated within 90 days of the EEOC’s issuance of the right-to-sue letter, but 440 days after her resignation–– which was outside the six-month contractual limitation period.

In finding the contractual limitation period unenforceable, the federal appellate court relied on US Supreme Court precedent, holding that “where statutes that create rights and remedies contain their own limitation periods, the limitation period should be treated as a substantive right.” Noting that Title VII has its own self-contained limitation period, the court found that Title VII’s limitation period is a non-waivable substantive right rather than a mere procedural rule.

The court continued, “And, because it is clear that there can be no prospective waiver of an employee’s rights under Title VII, it naturally follows that the limitation period of this statute is not prospectively waivable as it pertains to litigation.” By way of comparison, the court noted that, with respect to statutory frameworks where only a general limitation period applies, such as ERISA and §1981, no substantive right is created, and the limitation period can be contractually altered.

Finally, the court addressed three other Sixth Circuit decisions that “superficially” bore on its decision. As a result of this analysis, the court announced a rule that “a contractually shortened limitation period, outside of an arbitration agreement, is incompatible with the grant of substantive rights and the elaborate pre-suit enforcement mechanisms of Title VII.” It left open the possibility that, in the arbitration context and so long as the shortened limitation period did not overly burden an employee’s exercise of their Title VII rights, a different rule could apply (in light of the Federal Arbitration Act’s preference for that alternative dispute resolution mechanism).

If you have any questions regarding the content of this alert, please contact Brian Culnan, partner, at bculnan@barclaydamon.com or another member of the firm’s Labor & Employment Practice Area.

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Federal Appeals Court Strikes Down Contractual Limitation Period for Title VII Claims

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