Michigan Court Enforces Employment Contract Shortening Statute of Limitations
A Michigan appellate court recently enforced the following provision in Robert Clark’s employment contract with DiamlerChrysler:
I agree that any claim or lawsuit relating to my service with[DiamlerChrysler] or any of its subsidiaries must be filed no more than six(6) months after the date of the employment action that is the subjectof the claim or lawsuit. I waive any statute of limitations to thecontrary.
In 2001, the company had forced Clark into early retirement as part of a “salaried workforce reduction.” He worked his last day on August 31, 2001. On September 8, 2003, Clark filed an action against the company, alleging age discrimination. The trial court applied the shortened 6-month statute of limitations in Clark’s employment contract and dismissed the action. The appellate court affirmed. The court rejected Clark’s argument that the agreement was an unenforceable contract of adhesion, and rejected his argument that it was unconscionable because Clark had ” failed to present any evidence that he had no realistic alternative to employment with [DaimlerChrysler].”
Judge Neff dissented; she would have held that the contract provision wasboth procedurally and substantively unconscionable.
[Meredith R. Miller]
Judge Neff wrote that:
[the majority’s] analysis fails to give proper consideration to whetherprocedural unconscionability exists in the context of this case. Unlikeother contracts contexts, “an employer and employee often do not dealat arm’s length when negotiating contract terms. An employee [inplaintiff’s position] has only two options: (1) sign the employmentcontract as drafted by the employer or (2) lose the job.”
Defendantclaims that plaintiff is contractually bound by a provision for ashortened period of limitations in defendant’s employment applicationform that plaintiff filled out when applying for a job, five monthsbefore he was hired. The preprinted form was similar to otherpreprinted job application forms and required plaintiff to provide hispersonal information, educational background, employment history,positions for which he was qualified, and expected rate/salary. On thesecond page, immediately above plaintiff’s signature, the employment application contained the following provisions in a two-column format:
READ CAREFULLY BEFORE SIGNING:
1. I have read and do understand the statements contained herein and certify that they are true.
2. I understand that false or incomplete statements herein or in any resume I have supplied are grounds for dismissal.
3.I hereby authorize that previous employers contacted by ChryslerCorporation or any of its subsidiaries in connection with thisapplication fully respond to all inquiries concerning such previousemployment and specifically waive prior written notice of disclosure ofmy personnel record information, including disciplinary reports,letters of reprimand or other disciplinary action. I also authorizeeducational institutions to release information relative to claimeddegrees and achievements. In consideration of the acceptance of myapplication, I release Chrysler Corporation or any of its subsidiariesprevious employers, and educational institutions of any claimedliability arising out of such response and disclosure.
4. I understand that employment is conditioned upon the results of a physical examination by a physician selected by Chrysler Corporation or any of its subsidiaries conducted after an offer ofemployment is made or the results of a drug test conducted inaccordance with Chrysler Corporation’s policy.
5.In the event that I am employed by Chrysler Corporation or any of itssubsidiaries, I agree to comply with all its orders, rules, andregulations and acknowledge that said orders, rules, and regulations donot constitute terms of employment contrary to paragraph 6.
6.I hereby acknowledge that this application is for an employment ofindefinite duration, terminable at will, for any reason either bymyself or by Chrysler, except as otherwise provided by the terms of acollective bargaining agreement, if any, applicable to me.
7.I understand that the terms of paragraph 6 cannot be altered except bywritten agreement executed by an Officer of Chrysler Corporation.
8.I agree that any claim or lawsuit relating to my service with ChryslerCorporation or any of its subsidiaries must be filed no more than six(6) months after the date of the employment action that is the subjectof the claim or lawsuit. I waive any statute of limitations to thecontrary.
NOTE: A photocopy of this statement shall be as valid as the original.
Beneaththe eight provisions, the application requested the applicant’ssignature and date. Just below the signature line, the applicationstated in smaller print:
(This application will beconsidered active for twelve (12) months from the date filed. If youare hired, it becomes part of your official employment record.)
Giventhe manner in which defendant obtained “agreement” to the terms statedin the employment application, plaintiff clearly had no realisticalternative to the contractually shortened limitations period. Therewas “an absence of meaningful choice,” a hallmark of unconscionability.Further, the provision concerning a shortened limitations period also”takes advantage of or surprises the victim of the clause,”underscoring the procedural unfairness in this case.
While the principles of freedom of contract may support upholding a bargained-for term shortening the period of limitations,the nondescript provision imposed in paragraph eight in defendant’semployment application form cannot realistically be claimed to be a”bargained-for” term. First, it is unlikely that an applicant seeking ajob from an employer would engage in bargaining these terms at the timeof signing the application form. If the applicant is sufficiently awareof the implications of any particular term, such as the six-monthlimitations period, the applicant is surely also aware that objectionto the provision will thwart any offer of a job from the prospectiveemployer. Second, it is unlikely that at the time of hiring, in thiscase five months after plaintiff completed the application form, anapplicant would recall the limitations provision or recognize its broadcurtailment of legal rights, such that the applicant would thennegotiate different terms.
The shortened limitations period provision in this case cannot be sanctioned as a bargained-forterm under the freedom of contract principles. . . .
* * *
Defendantdoes not contend that it actually bargained for the shortenedlimitations period in hiring plaintiff. Defendant merely seeks toimpose a contractual limitations period via the boilerplate provisionson the job application form. It certainly cannot be said that plaintiffhad a meaningful choice about “whether and how to enter” into the agreement for asix-month limitations period. The manner in whichdefendant acquired plaintiff’s acquiescence to the shortenedlimitations period is procedurally unconscionable.
The dissent then reasoned that the imposition of a 6-month limitations period was substantively unreasonable because:
[t]he Legislature has determined that the appropriatelimitations period applicable in this action is three years. Theshortened six-month period imposed by defendant places plaintiff at asevere disadvantage in seeking redress for wrongs and is unquestionablyadvantageous to defendant by permitting it to wholly avoid employeeclaims.
The dissent also would have held that the provision violated public policy.
Clark v. DaimlerChrysler Corp., __ N.W.2d __ (Mich. Ct. of Apps. Sept. 13, 2005)