News/Event

Michigan Supreme Court Ruling Changes Contractually Shortened Statute of Limitations in Employment Agreements

On July 31, 2025, the Michigan Supreme Court ruled that “boilerplate” employment agreements that contain provisions that shorten the limitations period to bring civil rights claims must be examined for reasonableness in order to be enforceable. This was a major reversal of almost twenty years of precedent.  The general statute of limitation period for an employment discrimination claim is three (3) years and six (6) years for breach of contract.

In 2005, in Clark v DiamlerChrysler Corp., the Michigan Court of Appeals affirmed the use of a six (6) month contractually shortened limitation period in an employment agreement used by DiamlerChrysler Corp.  Based on that decision, many employment agreements contain such a six (6) month limitation period.

Now, in Rayford v American House Roseville I, LLC, the Michigan Supreme Court has changed things.   The Court did not expressly rule that a six (6) month limitations period for employment claims is per se unreasonable.  The Court ruled that lower courts evaluating the enforceability of any contractually shortened limitations period must evaluate whether the  contract is one of adhesion, and if it is, then the court must apply the Camelot test to determine whether the shortened limitations period is reasonable.

A contract of adhesion is one that is drawn up and used by enterprises with strong bargaining power while the “weaker” party has little choice as to the terms, merely “adheres” to the terms of the contract.  In reality, only the most sought after job applicants would have any bargaining power and most employees’ only option is to agree to the contract as presented by the employer or lose their job.  So, most employment agreements with a shortened limitations period, will likely be subject to a reasonableness standard.

Per Rayford, a contractually shortened limitation period in an adhesion contract will be reasonable, and enforceable, if all three (3) of the following are met:

  1. The claimant/employee has sufficient opportunity to investigate and file an action;
  2. The time is not so short as to work a practical abrogation of the right of action; and
  3. The action is not barred before the loss or damages can be ascertained.

If you have such a shorted limitations period provision in your employment agreement, it should be evaluated for reasonableness and you should be prepared that it may not be enforceable.

Feel free to contact Michelle Bayer at mbayer@jrlawplc.com (248) 626-9966 if you have any questions.

** Note this article is informational only and does not and is not intended to be legal advice nor create an attorney client relationship.