Last month, the Cuyahoga County Court of Appeals reversed an employer’s summary judgment dismissing the former employee’s OCRA sex discrimination and retaliation complaint as untimely under the shortened limitations period in her employment agreement. Toth v. Rocket Mtge., L.L.C., 2026-Ohio-926. The Court found that the trial court had failed to assess whether Michigan or Ohio law applied and whether the most recent amendments to Chapter 4112 would affect the enforceability of the shortened limitations period if Ohio law applied.
According to the Court’s opinion, the plaintiff alleged that
she had always worked from home in Cuyahoga County and had been terminated in September
2021 on account of her sexual orientation and prior complaints. She filed a Charge of Discrimination with the
OCRC in May 2023 and her lawsuit in February 2024. The
employer moved to dismiss and converted it to a summary judgment motion on the
grounds that her offer letter required her to report and visit its Detroit headquarters
and employment agreement contained a Michigan choice of law and venue provision
and contained a provision limiting her to bringing claims within one year. The trial court agreed that the complaint
was untimely and dismissed it. She appealed.
While agreeing that such shortened limitations periods have
traditionally been enforced, when reasonable, the Court of Appeals reversed and
remanded it to the trial court to make choice of law and venue findings.
The relevant employment agreement provided that claims must
be filed within one year in the county where the employee was employed:
Limitation Period and Venue. You
must assert any claim against the Company or its current or former employees,
officers, owners, or agents, within 1 year after your claim arises or within
the applicable statutory limitations period provided by law, whichever occurs
first. Your failure to do so shall act as a bar to any claim that you may have.
Claims must be asserted in the state court located in, or the federal court
that has jurisdiction over, the county in which you are or were employed by the
Company.
The Agreement also provided that the Agreement would be
interpreted under Michigan law.
Assuming that the trial court believed the limitations
period was enforceable whether Ohio or Michigan law applied, it dismissed the
claims as untimely without conducting a choice of law analysis. The appeals court found this to be premature
and engaged in an extensive discussion about choice of law principles. While the agreement required it to be
interpreted in accordance with Michigan law, this provision “does not evidence an intent to
subject tort claims or other types of claims between the parties to Michigan
law.” Employment discrimination claims
are more like tort claims. This means
that Michigan law may not be applicable since its choice of law provision only
applied to contract interpretation and not statutory or tort claims.
In this case, the trial court
failed to conduct a choice-of-law analysis to determine whether [the plaintiff’s]
statutory employment-discrimination claims were properly brought under R.C.
4112.052 or instead governed by Michigan’s analogous employment-discrimination
statute. The trial court’s failure to perform this analysis is significant.
Without this threshold determination, the trial court could not definitively
say whether the one-year contractual-limitations period contained in [her]
Employment Agreement was enforceable.
Materially different considerations
apply to the enforceability question depending on which state’s substantive law
governs [her] claims. If Ohio law governs [her] employment-discrimination
claims, the trial court will have to consider how recent amendments to R.C. Ch.
4112 — known as the Employment Law Uniformity Act (“ELUA”) — affect the
enforceability of the statute-of-limitations clause, if at all. Prior to the
ELUA, this court upheld contractual provisions shortening the limitations
period for employment-discrimination claims brought under R.C. Ch. 4112. . . . . However, the ELUA materially altered
the statutory scheme. Among its most consequential changes, the ELUA (1)
imposed an administrative-exhaustion requirement, mandating that claimants
first file a charge of discrimination with the OCRC and exhaust administrative
remedies before initiating a civil action for damages, see R.C.
4112.052(B)(1)(a), and (2) established a two-year statute of limitations for
employment-discrimination claims, which tolls during the pendency of the OCRC
process, see R.C. 4112.052(C)(1). Ohio courts have not yet assessed the impact,
if any, of these changes on the enforceability of contractual limitations
periods. But see Logan v. MGM Grand Detroit Casino, 939 F.3d 824,
828-829 (6th Cir. 2019) (holding that the contractual provision setting a
six-month limitations period was unenforceable as applied to the plaintiff’s
federal-discrimination claims brought pursuant to Title VII which, like the
ELUA, imposes a mandatory administrative process and includes a limitations
period directly in the statute). (bolding added for emphasis).
On the other hand, if Michigan law
governs [her] employment discrimination claims, as the Michigan Supreme Court
recently explained, contractual provisions in employment agreements that impose
reduced limitations periods are enforceable only if they are reasonable. . . . Under Michigan law, the reasonableness of a
contractually shortened limitations period is assessed by considering three
factors: (1) whether the reduced limitations period in the contract affords the
claimant a sufficient opportunity to investigate and file an action; (2)
whether the time limitation is so short as to effect a practical abrogation of
the right of action; and (3) whether the action would be barred before the loss
or damage can be ascertained. . . .
The appeals court rejected the plaintiff’s argument
regarding venue and the trial court had never ruled on it. “We do, however,
note that on remand if it is determined that venue is not proper in Cuyahoga
County but is proper in Michigan, then the Michigan court has authority to make
the choice-of-law determination, using that law that applies to that forum.”
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
