In-House Advisor

Why Not Try To Preempt Employee Claims by Shortening the “Statute” of Limitations?

May 22, 2023

   

No company wants to be sued by its current or former employees, particularly for discrimination claims. Even if you prevail, litigating such claims inevitably exposes you to public stigma and internal discord. In such situations, an early “procedural victory” can be worth much more than the mere cost savings of legal fees. So, wouldn’t it be nice if you could do something now to either decrease the chance of such a suit being filed and/or increase the chance of obtaining a quick, procedural victory if litigation does ensue? As a recent decision in the Federal District Court, Morales v. FedEx, makes clear, a contractual “statute of limitations provision” may allow your company to achieve these objectives.

Hector Morales began working for Federal Express in 2015 and was terminated on July 31, 2017. In May 2018, Morales filed a claim with the Massachusetts Commission Against Discrimination, alleging that his termination was based on racial discrimination and was retaliatory. In July of 2020, Morales filed a complaint in the Federal District Court, alleging, among other things, that FedEx had discriminated against him in violation of 49 U.S.C. § 1981.

Eventually, FedEx moved for summary judgment on the § 1981 claim based on a provision in Morales’ employment agreement in which he agreed that:

[T]o the extent the law allows an employee to bring legal action against the company …, I agree to bring any claim within the time provided by law or no later than six (6) months from the date of the event forming the basis of my claim, whichever expires first. I realize and acknowledge that I am agreeing to bring any claim I may have within a shorter time than may otherwise be provided by law.

As Judge Gorton explained in Morales, under Massachusetts law, shortening the statute of limitations by contract is permissible, as long as the agreed upon limitations period is reasonable. While reasonability will vary depending upon the circumstances of each case, Judge Gorton noted that “[a] variety of courts have found that the six-month limitations period set forth in the FedEx Employment Agreement is reasonable and bars federal employment discrimination claims brought after the expiration of that period.” Judge Gorton then went on to hold that:

[T]he language used in the Agreement that Morales signed was clear and unambiguous and Morales verified that he had “read [the] entire Agreement” and “thoroughly understood” its contents. … Under those circumstances …, the limitations period imposed is reasonable. Thus, the federal claims asserted are time-barred.

For in-house counsel, the takeaway from Morales is pretty straightforward: consider including a provision to shorten the time by which claims may be brought against the company in employment agreements and/or other contracts with employees. Doing so may eliminate, or lead to a quick resolution of many potential future claims.

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