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The AR Group

Contract Can?t Shorten FLSA Statute of Limitations

By Julie Morris

Although the Fair Labor Standards Act (FLSA) statute of limitations is two years for non-willful violations and three years for willful violations, employment agreements often contain shorter limitations. In light of this fact, the Sixth Circuit Court of Appeals recently held that agreements that purport to effectively waive an employee?s claims under either the FLSA or the Equal Pay Act (EPA) will not be enforced.

The Case:

In, Boaz v. FedEx Customer Information Services, Inc., Ms. Boaz signed an agreement with Federal Express Corporation (FedEx), that provided she would bring any legal action against it within six months or the time prescribed by law from the event forming the basis of her lawsuit, whichever was shorter. When she filed suit more than six months after accrual of the limitations period claiming FedEx had violated the FLSA and EPA, the trial court granted the Company?s motion to dismiss.? Boaz appealed.

On appeal, FedEx correctly pointed out that courts routinely enforce agreements that shorten the limitations period for claims arising under statutes such as Title VII. (See Oswald v. BAE Industries and Alonso v. Huron Valley Ambulance). However, the United States Court of Appeals for the 6th Circuit, stated in Boaz that to allow waiver in the context of wage and hour claims would provide a competitive advantage, as employers who racially discriminate against employees do not gain a?competitive advantage, while employers who pay employees less than minimum wage or unequal pay arguably gain a leg up on competitors. The court also distinguished an employee?s waiver of the judicial forum, such as a mandatory arbitration clause, from that of other contractual limiting waivers in that Boaz?s agreement, if enforced, operated as a complete waiver of her FLSA claim.

What this means to Employers:

The federal appellate court based its decision not just on the Supreme Court precedent, but also the rationale that allowing employees to waive their FLSA rights would give those employers a?competitive advantage. So, the question now becomes, how far will courts go with this? The Equal Employment Opportunity Commission (EEOC) treats waivability under the EPA like it does Title VII, Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) claims. (See EEOC Guidance ? Understanding Waivers of Discrimination Claims in Employee Severance Agreements.) Whether this will mean that EPA claims are not waivable through traditionally accepted means is therefore an open question. And this question will only be answered in time.

Smart Tip: Don?t throw the baby out with the bath water — Employers should not be discouraged from implementing agreements to shorten limitations periods, since the court?s reasoning 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 and the contract is drafted carefully.