Employment Contract Power Faces Test in 6th Circuit Bias Case

A federal appeals court in Cincinnati is set to consider whether companies can use employment contracts to trim the time workers have to file disability and age discrimination lawsuits.

The U.S. Court of Appeals for the Sixth Circuit will hear oral argument Tuesday in a former Fresh Products worker’s bid to revive her lawsuit against the odor-control product manufacturer. A federal judge ruled that she was too late with her claims of disability and age bias. Her employment agreement put a six-month deadline on all work-related lawsuits against the company.

A ruling that blesses the contract’s limitations periods could encourage more employers to shield themselves from potential workplace lawsuits by similarly narrowing filing deadlines through employment pacts.

Agreements requiring workers to arbitrate disputes with their employers have become commonplace. But contracts defining the statute of limitations for lawsuits are relatively rare, some management-side lawyers said.

The type of contract provision at issue in the Sixth Circuit case—which set a limitations period for all claims rather than specific types, such as “tort” claims brought under the common law—is especially unusual, said Jonathan Segal, an attorney who counsels employers at Duane Morris.

Even if courts don’t enforce deadlines that are set by agreements, those provisions can discourage workers from filing claims if they think the shortened limitations periods are enforceable, said Catherine Ruckelshaus, general counsel and legal director at the National Employment Law Project. Ruckelshaus said she’s concerned employers will use them more if the Sixth Circuit rules for Fresh Products.

A key consideration for the validity of a contractually shortened limitation period in the Sixth Circuit is whether the deadlines for filing qualify as a procedural right, which can be waived by agreement, or a substantive right, which cannot. The U.S. Supreme Court used a similar distinction in its 2018 ruling that said class-action waivers, which eliminate the right to sue collectively, are enforceable despite labor law’s protecting workers’ ability to act as a group.

Prior Sixth Circuit judicial panels approved of a shortened limitations period for race discrimination claims brought under section 1981 of the 1866 Civil Right Act in 2004, while striking them down for the Fair Labor Standards Act and the Equal Pay Act in 2013, and Title VII of the 1964 Civil Rights Act in 2019.

A three-judge panel composed of Circuit Judges Ralph Guy and Danny Boggs, both Ronald Reagan appointees, and Helene White, who was tapped by George H.W. Bush, will consider the validity of the filing deadlines in Fresh Products’ employment agreement.

Similarities, Differences Among Laws

Fresh Products fired Cassandra Thompson in January 2017 along with four other employees, all of whom weren’t able to work the company’s new shift structure of four 10-hour days per week. Thompson is Black, suffers from arthritis, and was in hear early 50s when she was fired. She sued for race, disability, and age discrimination under state and federal law in May 2018.

U.S. District Judge Jack Zouhary, a George W. Bush appointee, said the agreement that set the six-month filing deadline was valid for Thompson’s bias claims under the Americans with Disability Act, Age Discrimination in Employment Act, and the state equivalents. But her race discrimination claims could proceed, he said.

Zouhary cited the Sixth Circuit’s Logan v. MGM Grand decision that contracts can’t shorten Title VII’s limitations period and said Ohio state claims are subject to the same analysis. The judge went on to analyze all of Thompson’s claims, concluding that they were “either time-barred or meritless, or both.”

The Equal Employment Opportunity Commission, which is controlled by a GOP majority and led by an appointee of President Donald Trump, unanimously decided to support Thompson’s appeal of Zouhary’s ruling.

Like the deadlines for Title VII claims, the ADA and ADEA’s limitations period are substantive rights that can’t be waived by contract, the EEOC said in its brief.

The ADA’s enforcement mechanism, including its filing deadlines, is derived from Title VII, the EEOC said. And while the ADEA differs slightly from Title VII by allowing workers to bring a lawsuit 60 days after filing a bias charge without first getting a right-to-sue letter, that doesn’t change the fact that the ADEA’s limitations period is a substantive right that can’t be waived in advance, the agency said.

Fresh Products agreed that the ADA has the same enforcement scheme as Title VII, but the ADEA has a markedly different process.

“This process is significantly less elaborate than that provided in Title VII’s statutory framework,” the company said in its brief. “Contractual limitations periods, like the one to which Thompson agreed to be bound, are not incompatible with the administrative process provided in the ADEA.”

Thompson attacked the validity of the employment agreement on contractual grounds. She said in her brief that the agreement that she signed—an acknowledgment of receiving the employee handbook—isn’t a binding contract.

Moreover, Thompson said she didn’t review it because the company told her it wasn’t binding.

“As such, it is unconscionable to tell a party that you are only signing to acknowledge receipt of a document that is not a contract and then claim that such party is contractually bound,” according to her brief.

Attorneys for Thompson and Fresh Products didn’t respond to requests for comment.

The case is Thompson v. Fresh Products, 6th Cir., No. 20-03060, oral argument 7/28/20.