The Sixth Circuit Court of Appeals recently issued a decision in Boaz v. FedEx Customer Information Services, Inc., rejecting an employer’s defense to a claim made for unpaid overtime on the basis of a provision in an employment agreement. The court held that a provision in the agreement to shorten the statute of limitations for bringing an employment lawsuit to six months could not be used to waive the employee’s rights under to the Fair Labor Standards Act (FLSA).

Margaret Boaz began working for FedEx in 1997. At the outset of her employment, Boaz signed an employment agreement in which she agreed to file any legal action against FedEx “within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.” In April 2009, Boaz sued FedEx in the U.S. District Court for the Western District of Tennessee, alleging that among other things, the company had violated the FLSA by failing to pay her overtime compensation through June 2008. 

Boaz’s claim for unpaid overtime was timely under the general statute of limitations in the FLSA, which is two years for non-willful violations and three years for willful ones. However, FedEx filed a motion for summary judgment, arguing that the last alleged illegal activity underlying her claim—the issuance of Boaz’s June 30, 2008 paycheck—occurred more than six months before she filed suit, and was thus barred by the six-month statute of limitations in her employment agreement. The district court agreed and dismissed Boaz’s claims as untimely.

The Sixth Circuit reversed the decision by the district court and held that applying the six-month statute of limitations would amount to a waiver of Boaz’s FLSA rights, which is prohibited by the Supreme Court of the United States’ decision in Brooklyn Savs. Bank v. O’Neil. The Sixth Circuit further noted that waivers of FLSA claims generally are not enforceable, because they would “nullify” the Act’s purpose of achieving a uniform national policy of guaranteeing compensation for all work done by employees covered by the statute.

In reversing the lower court, the Sixth Circuit rejected FedEx’s argument that it should be permitted to contractually shorten the limitations period for FLSA claims because courts have allowed employers to do so for claims brought under Title VII of the Civil Rights Act of 1964. The Sixth Circuit distinguished the Title VII cases, because the Supreme Court had already held in Alexander v. Gardner-Denver Co., that employees can waive their Title VII claims and because an employer can gain a competitive advantage by paying an employee less than minimum wage, but does not garner any such advantage by refusing to employ minorities in violation of Title VII.

This decision does not eliminate all of the advantages gained by including a shortened limitations period in an employment application or agreement. Such limitation periods may still be enforceable, depending on the jurisdiction in which enforcement is sought, as well as the claim that is at issue. Indeed, in many jurisdictions and for many claims, a contractually-shortened limitations period is valid and enforceable and can be used by defense counsel as the basis for an early motion to dismiss. However, this decision does serve as a helpful reminder of the limitations of such provisions and that employers cannot rely solely upon them to defend against claims made by their employees. The Equal Employment Opportunity Commission and some courts also take the position that contractual limitations periods are unenforceable for federal civil rights claims.

Ultimately, before adopting a shortened limitations period, employers are advised to review the laws in their state and federal circuit and to consult with their local counsel.