Margaret Boaz is a FedEx employee who sued FedEx under both the Fair Labor Standards Act (“FLSA”) and the Equal Pay Act. (Boaz v. FedEx Customer Information Services, Inc., et al., 6th Cir. No. 12-5319, decided August 6, 2013.) Boaz began working for FedEx in 1997. Her employment agreement includes the following provision: “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.”
Boaz sued FedEx in April 2009, asserting claims under the FLSA and the Equal Pay Act. Boaz alleged that, from January 2004 through June 2008, FedEx had violated the Equal Pay Act, 29 U.S.C. § 206(d), by paying her less than it had paid her male predecessor for performing the same duties. She also alleged that FedEx failed to pay overtime compensation to her as required by the FLSA, 29 U.S.C. § 207(a).
FedEx moved for summary judgment, arguing that Boaz's claims were untimely under her employment agreement because the last alleged illegal activity — the issuance of Boaz's June 30, 2008 paycheck — occurred more than six months before she filed suit. The district court agreed and granted the motion. Boaz appealed to the Sixth Circuit.
The Fair Labor Standards Act of 1938 mandates that employers pay a federally-established minimum wage, as well as overtime, to certain types of employees. 29 U.S.C. § § 206(a), 207(a). An employer who violates the FLSA must pay the affected employee “the amount of their unpaid minimum wages, or their unpaid overtime compensation . . . and . . . an additional equal amount as liquidated damages.” Id. § 216(b). 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).
Shortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act's requirements — and thus gain an advantage over its competitors —by having its employees waive their rights under the Act. See Brooklyn Savs. Bank v. O'Neil, 324 U.S. 697, 706–10 (1945). Such waivers, according to the Supreme Court, would “nullify” the Act's purpose of “achiev[ing] a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.” Id. at 707. The Supreme Court therefore held that employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages.
Boaz argued that the six-month limitations provision in her employment agreement with FedEx operated as a waiver of her rights under the FLSA and was therefore invalid. FedEx responded that courts have enforced agreements that shorten an employee's limitations period for claims arising under statutes other than the FLSA — such as Title VII (the federal anti-discrimination statute). FedEx argued that the discrimination barred by Title VII (i.e., racial discrimination) is just as bad as the discrimination barred by the FLSA, and therefore, if an employee can shorten her Title VII limitations period, she should be able to shorten her FLSA limitations period as well.
The Sixth Circuit rejected FedEx’s arguments and sided with Boaz for two reasons:
First, employees can waive their claims under Title VII. See, e.g., Alexander v. Gardner–Denver Co., 415 U.S. 36, 52 (1974). 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 rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.
Therefore, the Sixth Circuit held that the six-month limitations provision in Boaz’s employment agreement deprives her of her statutory rights under the FLSA. Thus, the provision operates as a waiver of her FLSA claim and is therefore invalid.
The Sixth Circuit applied similar reasoning to Boaz’s claim under the Equal Pay Act. The Court stated:
In 1963, Congress enacted the Equal Pay Act as an amendment to the FLSA. See 29 U.S.C. § 206(d). By then the Supreme Court had already held that employees cannot waive their FLSA claims for unpaid wages and liquidated damages. See D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114 (1946); O'Neil, 324 U.S. at 707. We therefore presume that, by folding the Equal Pay Act into the FLSA, Congress meant for claims under the Equal Pay Act to be unwaivable as well. See Forest Grove Sch. Dist. v. T.A., 557 U.S. 230, 239–40 (2009); Miles v. Apex Marine Corp., 498 U.S. 19, 31–32 (1990).
The Sixth Circuit also found that the Supreme Court's rationale for barring waiver of FLSA claims appears fully applicable to claims under the Equal Pay Act. The Court reasoned that 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. “The 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).
Based on this reasoning, the Sixth Circuit held that the six-month limitations provision in Boaz’s employment agreement operates as an illegal waiver of her rights under the Equal Pay Act and, is therefore, also invalid as applied to her Equal Pay Act claim.
The takeaway for employers is that limitations provisions in employment agreements are invalid as applied to employee FLSA and Equal Pay Act claims. Therefore, if an employee’s FLSA and/or Equal Pay Act claim(s) is timely brought within the statutory limitations period, the employer must be prepared to defend such claim(s) on the merits, regardless of any limitations provision in its employment agreement with the employee.