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Agreements Shortening Limitations Periods Not Enforceable Under the FLSA or EPA

An effective way for Kentucky employers to avoid the chance that a disgruntled employee may take advantage of Kentucky’s long statutes of limitations to file an employment claim (often five years) is to enter into an enforceable agreement with the employee for a shortened limitations period.  In most cases, courts will enforce such agreements where proper contract principles are observed, as long as the agreements provide for at least a six-month limitation period, and the statute under which the employee sues does not prohibit a shortening of the limitations period.  (Some courts have held that the Family and Medical Leave Act (FMLA) prohibits such shortening).

On August 6, 2013, the Sixth Circuit Court of Appeals held for the first time that such agreements will not be enforced where an employee has filed suit under the Fair Labor Standards Act (FLSA) or the Equal Pay Act (EPA) if the agreement effectively serves as a waiver of the employee’s claim under one or both of those statutes. 

In this very recent case, Boaz v. FedEx Customer Information Services, Inc., Ms. Boaz had signed an agreement with Federal Express Corporation (FedEx), agreeing that she would bring any legal action against it within the time prescribed by law or six months from the event forming the basis of her lawsuit, whichever was shorter.  When she filed suit more than six months after the last date that she claimed FedEx had violated the FLSA and EPA, FedEx moved to dismiss her case.  The trial court granted the motion to dismiss.  Ms. Boaz appealed to the Sixth Circuit Court of Appeals, which hears appeals from federal courts in Kentucky and nearby states. 

FedEx argued that courts have routinely enforced agreements that shorten the limitations period for claims arising under statutes other than the FLSA, such as Title VII.  It also argued that the Sixth Circuit had previously upheld agreements whereby employees agreed to waive their right to a judicial forum in favor of an arbitration forum, under the FLSA and other statutes, because the forum in which a case is tried is merely “procedural,” not “substantive.”  FedEx correctly pointed out that statutes of limitation have likewise been deemed to be merely procedural and thus subject to waiver. 

The Sixth Circuit, however, was not persuaded by FedEx’s arguments.  It noted that, soon after the FLSA was enacted, the United States Supreme Court recognized that employees could not waive their rights under the Act.  In this sense, it was different from Title VII and many other statutes where the Supreme Court had never expressed concern about a waiver of employee rights.  The Court went on to observe that the limitations period in the Boaz case effectively operated as a complete waiver of Ms. Boaz’s FLSA claim, and therefore the trial court’s dismissal of that claim had to be reversed. 

With regard to Ms. Boaz’s claim under the EPA, the Sixth Circuit held that the result was the same:  By 1963, when the EPA was added as an amendment to the FLSA, the Supreme Court had already held that employees could not waive their rights under that statute.  The Sixth Circuit went on to observe that the reduced statute of limitations effectively operated as a complete waiver of her EPA claim, just as it did with the FLSA claim.  Thus, the Court reversed the trial court’s dismissal of her claim under the EPA as well. 

This case should not discourage employers from implementing agreements to shorten limitations periods, since the reasoning of Boaz does not apply to most statutes and common law theories under which employees sue their employers.  These agreements can be extremely beneficial, if proper contract principles are applied.  But, it is important to keep in mind that, at least within the federal courts in Kentucky, such agreements will not be enforced if suit is brought under the FLSA or EPA (and quite possibly under the FMLA).

Click here for a copy of the Sixth Circuit’s decision in Boaz v. FedEx Customer Information Services, Inc.

If you have questions regarding this, or any other legal issue, please feel free to contact a member of Bingham Greenebaum Doll LLP’s Labor and Employment practice group.

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