Sixth Circuit: Employers Cannot Shorten FLSA/EPA Limitations Periods in Employment Agreements or Waivers

Yesterday, a unanimous Sixth Circuit reversed an employer’s summary judgment in a claim for unpaid overtime and unequal wages under the Fair Labor Standards Act (FLSA) and Equal Pay Act (EPA). Boaz v. FedEx Customer Information Services, Inc, No. 12-5319 (6^th Cir. 8-6-13).  First, the Court found that the employment agreement could not shorten the statutory limitations period from 2-3 years to 6 months because it constituted an invalid waiver of her FLSA and EPA claims.    Unlike other statutory claims, private settlement agreements or waivers of FLSA and EPA claims are not enforceable. Second, the Court found material factual disputes on the merits of her claims for unpaid overtime and unequal pay.  More interestingly, the Court made some observations about the perceived anti-competitive affects of various types of discrimination.

The plaintiff filed suit in April 2009 alleging that she had been paid less than a male co-worker performing the same job and that she had been denied overtime pay for jobs she held more than six months earlier (when she had been promoted to a new job).  “The statute of limitations for the FLSA is two years for non-wilful violations and three years for wilful ones. 29 U.S.C. § 255(a).”   As long ago as 1946, the Supreme  Court had held that “employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. “  The plaintiff’s employment agreement in this case provided in relevant part that:

 

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

The employer argued that employers are allowed to shorten the limitations period for claims brought under other statutes, like Title VII, and should be able to shorten the limitations period for claims brought under the FLSA.   However, the Court rejected that argument because, unlike the FLSA, employees are permitted to privately settle and waive their claims under Title VII.  In addition, in a startling observation, the Court stated:

Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36 (1987). An employer who refuses to hire African-Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.

The employer next argued that employees are allowed to waive their right to a judicial forum under the FLSA by signing arbitration agreements because the prohibition against private waivers has been held to only apply to substantive rights and not procedural ones.  However, the Court distinguished this precedent by noting that waiving the judicial forum still allows for the effective vindication of the employee’s claim, while the shortened limitations period in the plaintiff’s employment agreement “at issue here does the opposite.”  Therefore, because the limitations provision in the employment agreement operated as a waiver of her claims, “it is invalid.”

The Court held that this reasoning applied with equal force to the plaintiff’s EPA claims because Congress amended the FLSA in 1963 to include the EPA.   Moreover, in contrast to what the Court said (above) about the anti-competitive effects of Title VII, it made the following observation about the EPA:

Second, the Supreme Court’s rationale for barring waiver of FLSA claims appears fully applicable to claims under the Equal Pay Act. An employer who pays women less than a lawful wage might gain the same competitive advantage as an employer who pays less than minimum wage. Indeed the Court has said that “[t]he whole purpose of the [Equal Pay Act] was to require that the[] depressed wages [of women] be raised, in part as a matter of simple justice to the employees themselves, but also as a matter of market economics[.]” Corning Glass Works v. Brennan, 417 U.S. 188, 207 (1974).

The Court also rejected other potential bases to affirm the summary judgment.  For instance, the Court refused to credit the plaintiff’s deposition admission that she had been an exempt employee:

An employee’s subjective belief that her position was exempt from the FLSA, however, does not mean the position was exempt as a matter of law. Cf. Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 300–01 (1985) (witnesses’ testimony that they were volunteers was not dispositive of whether they were actually employees under the FLSA). Were it otherwise, an employer could obtain waivers of FLSA  claims  merely by having its employees sign a form stating that they are exempt. FedEx is therefore not entitled to summary judgment on this ground.

The Court found material factual disputes in the employer’s remaining arguments about comparative employees and affirmative defenses.  Therefore, the case was remanded back to the trial court.

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.

Sixth Circuit: Pre-2002 ERISA Plan Need Not Inform Beneficiary of Shortened Statute of Limitations to Seek Judicial Review

Last week, the Sixth Circuit Court of Appeals affirmed the dismissal of an ERISA claim brought more than eight years after the plaintiff’s claim for long-term disability had been denied because the Plan only permitted claimants three years to seek review in federal court.  Engleson v. Unum Life Ins. Co. of Am., No. 12-4049 (6^th Cir. 7-3-13).  The Court rejected the plaintiff’s argument that ERISA at that time required the Plan to disclose the shortened limitations period in its claim denial letters or the summary plan description.  It was not until 2002 that the Plan was required to disclose information in claim denial letters about the claimant’s right to seek federal court review. “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.” Finally, the Court rejected the plaintiff’s waiver and equitable tolling arguments.
 

According to the Court’s opinion, the plaintiff had filed his LTD claim in August 2001, but it and his subsequent appeal were denied, most recently in November 2001.  He filed a new claim in August 2008, which was granted.  He then sought review of his 2001 claim and when it was denied again, he filed suit in federal court in December 2009. The district court concluded that “[t]he plan requires participants to file an ERISA claim within “3 years after the time proof of claim is required.” Therefore, his lawsuit was untimely in March 2005.  

The Sixth Circuit rejected the plaintiff’s contention that the 2000 version of 29 C.F.R. § 2560.503-1(f) required the Plan to disclose the shortened statute of limitations in its claim denial letters.   Instead, the Court “construe[d] the phrase “appropriate information” as requiring only the disclosure of information pertaining to internal processes, not judicial review.”  (emphasis in original).  The ERISA regulations were amended effective January 1, 2002 at 29 C.F.R. § 2560.503-1(g)(1)(iv) to require the disclosure of “a description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action” to challenge adverse benefit determinations.” 

Moreover, the Court rejected the plaintiff’s argument that the Plan’s 2008 invitation to submit additional information about his 2001 claim and then refusal to reconsider the 2001 claim re-started the limitations period.  “When an adverse benefit determination is justified in the first instance and later denials are premised on the initial reason, there has been a “full and fair review” that satisfies § 1133 and its regulations.”

The plaintiff also argued that the SPD did not comply with 29 C.F.R. § 2520.102-3 because it failed to disclose the shortened statute of limitations for seeking judicial review even though it was required to address “applicable time limits” and remedies for the claimant to seek redress of claims.  “Because SPDs lack controlling effect in the face of plan language to the contrary, we do not feel compelled to read the regulation in a manner that requires sweeping, comprehensive disclosure, as [the plaintiff] asks us to do.”  Instead, the Court interpreted the regulation’s general phrase “applicable time limits” to extend “only to the terms that precede it, i.e., time limits need only be disclosed with respect to the processing of claims.” 

Mindful of this interpretation, we conclude that Unum’s SPD complied with the regulation. The SPD provided “applicable time limits” as to certain parts of the claims process, such as the plan administrator’s obligation to provide a claim response within 90 to 180 days and the claimant’s right to seek plan documents by filing suit in federal court after 30 days of noncompliance. Unum complied with the requirement of disclosing the time limits for the “remedies available under the plan for the redress of claims” by (1) explaining the internal appeals process; and (2) noting the claimant’s right to “file suit in a state or federal court” for claims that have been denied or ignored.

In addition, the Court rejected the claimant’s common law waiver argument based on the Plan’s  offer reconsider his 2001 claim if he submitted additional information. 

As there is no established federal common law in this circuit that governs the question of whether a plan administrator has affirmatively waived a contractual limitations provision, we “look to state-law principles for guidance.”  . . . While contractual limitations periods are generally enforced irrespective of state law so long as they are reasonable . . .  the present case does not raise the question as to whether the period is reasonable, but whether the period was waived.

The Court had previously relied on Hounshell v. American States Insurance Co., 424 N.E.2d 311, 314 (Ohio 1981) where 

“[a]n insurer . . . loses the right to assert its contractual statute of limitations if, ‘by its actions or declarations, it evidences a recognition of liability under the policy, and the evidence reasonably shows that such expressed recognition of liability and offers of settlement have led the insured to delay in bringing an action on the insurance contract.’”  . . .  An insurer’s decision to reconsider the validity of a claim, however, “does not constitute a waiver of the limitations clause.

While there may be alternatives to waiving a right than as discussed in Hounshell, the Court required “more than mere relinquishment—the waiver must be “a clear, unequivocal, and decisive act of the party against whom the waiver is asserted.”  The Plan’s “December 2008 letter lacks the clarity, directness, and decisiveness that the general waiver rule demands.”  More importantly, it “says nothing about waiving the limitations period.”

Finally, the Court rejected the equitable tolling argument on the grounds, among other things, that the plaintiff was not diligent in pursuing his rights.  Moreover, there was no evidence of bad faith.

 

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.

Ohio Shortened Limitations Period for Written Contracts

 Ohio employers with document retention policies generally maintain copies of written contracts for at least 15 years because that is the period of time in which the other party could bring a lawsuit for breach of it.   However, in June, the General Assembly shortened the limitations period from 15 years to 8 years, effective September 28, 2012.  Actions which accrued prior to September 28 must be brought within the former 15 year limitations period or before September 28, 2020, whichever date comes first.   New breach of contract actions which accrue or arise after September 28, 2012 are limited to 8 years.  Employers may want to accordingly modify their document retention policies. 

The enrolled version of Senate Bill 224 provides as follows:

SECTION 1. That section 2305.06 of the Revised Code be amended to read as follows:

Sec. 2305.06. Except as provided in sections 126.301 and 1302.98 of the Revised Code, an action upon a specialty or an agreement, contract, or promise in writing shall be brought within fifteen eight years after the cause thereof of action accrued.

SECTION 2. That existing section 2305.06 of the Revised Code is hereby repealed.

SECTION 3. Subject to Section 4 of this act, section 2305.06 of the Revised Code, as amended by this act, applies to actions in which the cause of action accrues on or after the effective date of this act.

Section 4. For causes of action that are governed by section 2305.06 of the Revised Code and accrued prior to the effective date of this act, the period of limitations shall be eight years from the effective date of this act or the expiration of the period of limitations in effect prior to the effective date of this act, whichever occurs first.

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.

Supreme Court: Disparate Impact Claims Accrue with Each New Employer Action Regardless of When Policy Was Adopted

This morning, the United States Supreme Court ruled that Title VII disparate impact claims accrue each time the employer uses the facially neutral employment practice which has a disparate impact on a protected class. Lewis v. City of Chicago. No. 08-974 (5/24/10). Accordingly, the class action could proceed with its disparate impact discrimination claims even though the earliest Charge of Discrimination filed by a class member was filed with the EEOC more than 300 days after the challenged policy was adopted and announced and even more than 300 days after it had first been applied because the employer had used the disputed employment practice on other occasions within 300 days of when the Charge had been filed. Writing for a unanimous Court, Justice Scalia noted that to have held otherwise would mean that an employer could indefinitely utilize a discriminatory policy if it were lucky enough not to be challenged within the first 300 days.

According to the Court's opinion, the City of Chicago administered a civil service test in 1995 to select firefighters. In January 1996, it announced that applicants who scored below 65 failed and would not be considered further and that even though applicants with scores between 66 and 88 passed and, thus were qualified, they would not be considered for vacancies until all of the "well qualified" applicants who scored 89 or better were hired or given further consideration. No applicant filed a Charge of Discrimination to challenge the City's stated policy. In May 1996, the City hired its first class of firefighters from the 1995 list based on the policy announced in January 1996 and, again, no applicant filed a Charge of Discrimination to challenge the City's action within 300 days. The City then continued to process candidates off the 1995 list for six years until it ran out of "well qualified" applicants and began processing "qualified" candidates. In March 1997, the first Charge of Discrimination was filed by a qualified applicant who was passed over by the City's January 1996 process, the EEOC completed its investigation in July 1998 and a class action lawsuit was filed later that year. The trial court denied summary judgment to the City on the issue of timeliness while the plaintiff were pursuing a continuing violation theory to avoid the 300-day limitations period issue. There was then an eight-day bench trial which found in favor of the plaintiffs. The City apparently stipulated that the adoption of the 89-point cut off had a severe disparate impact on African-Americans. (There was no evidence presented that the City's use of the policy had a disparate impact each or any time it was utilized.) The Seventh Circuit Court of Appeals had reversed the trial court judgment on the grounds that the City's hiring decisions were merely the affect of a past decision which the plaintiffs had failed to challenge within the 300-day limitations period. The Supreme Court reversed.

Employment decisions may be challenged as intentional discrimination (i.e., disparate treatment) or unintentional discrimination (i.e., disparate impact). The second theory began in the Supreme Court's 1971 decision in Griggs v. Duke Power Co., 401 U. S. 424, 431 (1971). Congress later amended Title VII at 42 U.S.C. § 2003-2(k):

"(1)(A) An unlawful employment practice based on disparate impact is established under this subchapter only if—

"(i) a complaining party demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and the respondent fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity . . . ."

Thus, a plaintiff establishes a prima facie disparate impact claim by showing that the employer "uses a particular employment practice that causes a disparate impact" on one of the prohibited bases.

Title VII requires that a Charge of Discrimination be filed with the EEOC within 300 days "after the alleged unlawful employment practice occurred." §2000e–5(e)(1).
In disparate treatment cases, that "practice" is when the employment action is deliberately taken with discriminatory intent. After the passage of 300 days, employees cannot later sue for the current affects of past discriminatory decisions under the disparate treatment theory. However, in disparate impact cases, no discriminatory intent is required. Thus, in disparate impact the question is generally not whether the lawsuit is timely, but whether a valid disparate impact claim can be alleged at all. In other words, if the plaintiff can show that any employment action taken in the prior 300 days has a disparate impact, then the claim can proceed regardless of when the employment practice was first adopted or utilized. In this case, the City's practice of excluding candidates with a score between 66 and 88 from further consideration constituted an employment practice and, apparently, it was stipulated that it had an adverse impact on the plaintiffs on account of their race.

While the Court had sympathy with the plight of the City (and all other employers) that its decision to adopt the policy became lawful when it was not timely challenged, the Court concluded that "it does not follow that no new violation occurred—and no new claims could arise—when the City implemented that decision down the road. If petitioners could prove that the City" use[d]" the "practice" that "causes a disparate impact," they could prevail.

Granted, "[e]mployers may face new disparate-impact suits for practices they have used regularly for years. Evidence essential to their business-necessity defenses might be unavailable (or in the case of witnesses' memories, unreliable) by the time the later suits are brought. And affected employees and prospective employees may not even know they have claims if they are unaware the employer is still applying the disputed practice." However, the alternative was even less satisfactory:

[I]f an employer adopts an unlawful practice and no timely charge is brought, it can continue using the practice indefinitely, with impunity, despite ongoing disparate impact. Equitable tolling or estoppel may allow some affected employees or applicants to sue, but many others will be left out in the cold. Moreover, the City's reading may induce plaintiffs aware of the danger of delay to file charges upon the announcement of a hiring practice, before they have any basis for believing it will produce a disparate impact.

The case was remanded to the Seventh Circuit to determine whether a new trial was necessary and whether the relief ordered by the trial court should be modified (as stipulated by the parties) to exclude consideration of the first round of hiring decisions which were made more than 300 days before the filing of the first Charge.

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.

Ohio Supreme Court Limits Federal Civil Rights Claims to Two Years.

Yesterday, the Ohio Supreme Court decided that Ohio Revised Code § 2305.10’s two year statute of limitations applied to federal civil rights claims – such as § 1983 claims -- which lack a federal statute of limitations. Nadra v. Mbah, 2008-Ohio-3918. Section 1983 claims are frequently brought against government entities, agencies, employees and officers by government employees and regular citizens alleging that the plaintiff’s federal civil rights were violated under color of state law.

In Nadra, Franklin County Children Services employees and the Columbus Police investigated plaintiff’s home and found her “nine-year-old son locked in the basement. On January 3, 2002,” defendant FCCS employees “filed a complaint alleging that Nadra punished her son by locking him in the basement, chaining him to a pole at times, withholding food from him, and making him use a bucket as a toilet. Consequently, the complaint asserted that Nadra’s son was abused, neglected, and dependent.” Custody was eventually awarded to the child’s father and a jury acquitted plaintiff of criminal charges filed in the matter. Thereafter – more than two years after the child had been removed from her home, the plaintiff filed suit against the children services employees alleging that they violated her civil rights under color of state law under § 1983.

Writing for the majority, Justice Stratton wrote that the court was “asked to determine which statute of limitations governs actions filed in Ohio under Section 1983, Title 42, U.S. Code. The Supreme Court has instructed that in Section 1983 actions, courts must apply a state’s general or residual statute of limitations that governs personal-injury actions. Owens v. Okure (1989), 488 U.S. 235, 109 S.Ct. 573, 102 L.Ed.2d 594. We hold that R.C. 2305.10, which contains a two-year limitations period, is Ohio’s general statute of limitations governing personal injury in Ohio. Therefore, we reverse the judgment of the court of appeals.”

The dissent and the Franklin County Court of Appeals had concluded that the four-year statute of limitations in O.R.C. § 2505.09 applied. R.C. 2305.09 provides in relevant part that: “An action for any of the following causes of action shall be brought within four years after the cause thereof accrued: * * * (D) For an injury to the rights of the plaintiff not arising on contract nor enumerated in sections, 2305.10 to 2305.12 * * * of the Revised Code.” In contrast, the statute which the Court found to apply provides in relevant part that “an action “for bodily injury or injuring personal property shall be brought within two years” after the cause of action accrues.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/0/2008/2008-Ohio-3918.pdf.

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.

Ohio Supreme Court Limits Federal Civil Rights Claims to Two Years.

Yesterday, the Ohio Supreme Court decided that Ohio Revised Code § 2305.10’s two year statute of limitations applied to federal civil rights claims – such as § 1983 claims -- which lack a federal statute of limitations. Nadra v. Mbah, 2008-Ohio-3918. Section 1983 claims are frequently brought against government entities, agencies, employees and officers by government employees and regular citizens alleging that the plaintiff’s federal civil rights were violated under color of state law.

In Nadra, Franklin County Children Services employees and the Columbus Police investigated plaintiff’s home and found her “nine-year-old son locked in the basement. On January 3, 2002,” defendant FCCS employees “filed a complaint alleging that Nadra punished her son by locking him in the basement, chaining him to a pole at times, withholding food from him, and making him use a bucket as a toilet. Consequently, the complaint asserted that Nadra’s son was abused, neglected, and dependent.” Custody was eventually awarded to the child’s father and a jury acquitted plaintiff of criminal charges filed in the matter. Thereafter – more than two years after the child had been removed from her home, the plaintiff filed suit against the children services employees alleging that they violated her civil rights under color of state law under § 1983.

Writing for the majority, Justice Stratton wrote that the court was “asked to determine which statute of limitations governs actions filed in Ohio under Section 1983, Title 42, U.S. Code. The Supreme Court has instructed that in Section 1983 actions, courts must apply a state’s general or residual statute of limitations that governs personal-injury actions. Owens v. Okure (1989), 488 U.S. 235, 109 S.Ct. 573, 102 L.Ed.2d 594. We hold that R.C. 2305.10, which contains a two-year limitations period, is Ohio’s general statute of limitations governing personal injury in Ohio. Therefore, we reverse the judgment of the court of appeals.”

The dissent and the Franklin County Court of Appeals had concluded that the four-year statute of limitations in O.R.C. § 2505.09 applied. R.C. 2305.09 provides in relevant part that: “An action for any of the following causes of action shall be brought within four years after the cause thereof accrued: * * * (D) For an injury to the rights of the plaintiff not arising on contract nor enumerated in sections, 2305.10 to 2305.12 * * * of the Revised Code.” In contrast, the statute which the Court found to apply provides in relevant part that “an action “for bodily injury or injuring personal property shall be brought within two years” after the cause of action accrues.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/0/2008/2008-Ohio-3918.pdf.

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.