An employee who agreed to a six-month limitations period to bring suits against the company as part of her employment agreement did not waive the three-year statute of limitations under the Fair Labor Standards Act, the 6th U.S. Circuit Court of Appeals recently held, reversing dismissal of the suit.
FedEx employee Margaret Boaz filed suit against the company alleging violations of the FLSA and the Equal Pay Act, seeking overtime compensation and the difference between the amount she was paid and
the amount the company paid her male predecessor.
FedEx moved to dismiss, arguing that Boaz’s suit was time-barred. The company relied on a provision in her employment agreement, which stated: “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.”
Because Boaz received her last allegedly illegal check on June 30, 2008, but did not file suit until April 2009, FedEx argued that her suit was untimely because more than six months had passed. A trial court agreed and granted FedEx’s motion to dismiss.
But the 6th Circuit reversed.
The U.S. Supreme Court has expressed concern about employers circumventing the Act’s requirements by allowing employees to waive their rights, the three-judge panel noted, holding that employees may not
prospectively or retrospectively waive their FLSA rights to minimum wages, overtime, or liquidated damages.
Boaz accrued an FLSA claim every time FedEx issued her an allegedly illegal paycheck, and the six-month limitations period imposed by the agreement – if enforced – would operate as a waiver of those rights.
Because the Supreme Court has said that an employment agreement cannot operate to deprive employees of such rights, “the six-month limitations period in her employment agreement is invalid,” the court concluded.
FedEx pointed to decisions enforcing employment agreements that allowed employees to shorten the statute of limitations period under other federal statutes, such as Title VII. While discrimination under other
statutes is equally invidious, the panel agreed, the Supreme Court has allowed employees to waive their claims under Title VII. In addition, employers who racially discriminate against employees do not gain a
competitive advantage, while employers who pay employees less than minimum wage arguably do gain a leg up on competitors. “The Court’s rationale for prohibiting waiver of FFLSA claims is therefore not present for Title VII claims,” the court wrote.
The panel also distinguished an employee’s waiver of the judicial forum for an FLSA claim, like a mandatory arbitration clause in an employment agreement. Such a waiver does not eliminate an employee’s rights, the court said, whereas Boaz’s agreement, if enforced, operated as a complete waiver of her FLSA claim.
Similar logic led the court to conclude that claims under the Equal Pay Act – enacted as an amendment to the FLSA in 1963, after the U.S. Supreme Court had already held that employees cannot waive their FLSA claims for unpaid wages and liquidated damages – could also not be waived by an employment agreement.
“[B]y folding the Equal Pay Act into the FLSA, Congress meant for claims under the Equal Pay Act to be unwaivable as well,” the panel said.
To read the 6th Circuit’s decision in Boaz v. FedEx Customer Information Services, Inc., click here.
Why it matters: The federal appellate panel 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. The 6th Circuit also distinguished the waiver of rights under other federal statutes based upon a 1945 Supreme Court decision. Whether that decision would withstand scrutiny from the Court in 2013 – with a majority of the justices recently affirming an employee’s ability to waive class actions in arbitration – is an open question. A spokesperson for FedEx told Law360 the company plans to “continue to defend the lawsuit.”