The Sixth Circuit held that a six-month time limitation in an employment agreement constitutes an invalid waiver of an employee’s claims brought under the Fair Labor Standards Act (“FLSA”) and, more surprisingly, the Equal Pay Act (“EPA”).

In Boaz v. FedEx Customer Information Services, Inc. No. 12-5319 (6th Cir. Aug. 6, 2013), the plaintiff, Margaret Boaz, was employed with FedEx since 1997. Her employment agreement with FedEx (the “Agreement”) included 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 six months from the date of the event forming the basis of my lawsuit, whichever expires first.”

On June 30, 2008, Ms. Boaz received her last paycheck as an employee. In April 2009, she sued FedEx alleging claims under the FLSA and the EPA arguing FedEx paid her less than other employees for the same work (her EPA claim) and failed to pay her overtime compensation (her FLSA claim).

FedEx moved for summary judgment arguing her claims were untimely under the Agreement because the last allegedly illegal activity—the issuance of the June 30, 2008 paycheck—occurred more than six months before she filed suit. The district court held that the provision was enforceable and barred Ms. Boaz’s what-it-deemed untimely claims. The Sixth Circuit reversed finding the six-month time limitation constituted an invalid wavier under the FLSA and the EPA.

The Sixth Circuit’s Not-So-Surprising Analysis on the FLSA Claim

The Court began its analysis by going through the history of the FLSA, specifically, why courts force employers to go through a tedious process involving either the Department of Labor (“DOL”) or the courts to resolve employee FLSA claims. The court noted that shortly after the FLSA was enacted, the Supreme Court expressed concern that employers would try to circumvent the FLSA’s requirements, and gain an advantage over their competitors, by having its employees waive their rights under the FLSA. Because of this, the Supreme Court found that such waivers would “nullify” the FLSA’s purpose of “achieve[ing] a uniform policy of guaranteeing compensation for all work or employment engaged in by employees covered by the [FLSA].” Because of this, the Supreme Court held that employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. (For more about the history of the FLSA and prohibited waivers, see our blog: “Coming soon to a jurisdiction near you (hopefully), the Fifth Circuit holds that a private settlement agreement dismissing FLSA claims is enforceable”.) Thus, the issue was whether the six-month time limitation in the Agreement operated as a “waiver” of Ms. Boaz’s FLSA rights. The Sixth Circuit cited the Supreme Court’s Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of Am., 325 U.S. 161, 167 (1945) decision for the position, “[a]n employment agreement ‘cannot be utilized to deprive employees of their statutory [FLSA] rights’” and noted that, if it were to apply the time limit in the Agreement, this would be “precisely the effect.” Thus, the Court found that the six-month limitations period in the Agreement acted an invalid waiver and reversed the lowers court’s granted of summary judgment.

The Sixth Circuit did note that employers can use agreements, like employment agreements, to shorten an employee’s limitation period for claims arising under other employment laws including discrimination/retaliation claims under Title VII, which leads into the Court’s more surprising analysis and holding on Mr. Boaz’s EPA claim.

The Sixth Circuit’s Surprising Analysis on the EPA Claim

In turning to Ms. Boaz’s EPA claim, the Court framed the issue as answering the question of whether the same six-month time limitation provision in the Agreement constituted an invalid waiver under the EPA as well as the FLSA. Without much analysis, the Court held the time limitation provision was also an invalid waiver under the EPA. In coming to this conclusion and, as I said before, without much analysis, the Court noted that in enacting the EPA as an amendment to the FLSA, the legislature knew the Supreme Court’s position that employees cannot waive their FLSA claims for damages and, therefore, by folding the EPA into the FLSA, Congress meant for claims under the EPA to be unwaivable as well.

The Court went on to find that the Supreme Court’s rationale for barring waiver of FLSA claims fully applicable to claims under the EPA, i.e., an employer who pays a woman less than a lawful wage might gain the same competitive advantage as an employer who pays less than minimum wage.” With this, the Court found that Ms. Boaz could not waive her EPA claim through the time limitation provision in the Agreement and reversed the district court on this issue as well and remanded the case to the district court.

Takeaway: This case solidifies the Supreme Court’s long-held position that employees cannot waive their right to wages and damages under the FLSA, and this includes through time limitation provisions in employment agreements. Here though, the Court gave employers an added nugget to mull over—employees cannot waive claims for wages and damages under the EPA either because the EPA was folded into the FLSA. Wait, what? Huh?

I understand the Supreme Court’s and the Eleventh Circuit’s view in not allowing employees to waive claims under the FLSA (though I do think it means unnecessary and typically protracted litigation for all involved), but that is because the FLSA has Section 216(c), which provides (and as the Eleventh Circuit explained in Lynn’s Food Stores, Inc. v. Unites States, 679 F.2d 1350 (11th Cir. 1982)): “there are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under section 216(c), the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. An employee who accepts such a payment supervised by the Secretary thereby waives his right to bring suit for both the unpaid wages and for liquidated damages, provided the employer pays in full the back wages. The only other route for compromise of FLSA claims is provided in the context of suits brought directly by employees against their employer under section 216(b) to recover back wages for FLSA violations. When employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.”

So here is where I miss the Court’s extending the purpose of the FLSA to the EPA. In theory, the two statutes serve similar purposes.  However, courts have not been willing to allow employees to waive their claims and damages under the FLSA because the FLSA has Section 216 that provides that any settlement must go through the DOL or the court system. The EPA does not have the equivalent of the Section 216 provision, so it is unclear where this leaves the ability to waive, release or settle EPA claims.

This is certain to have wide-ranging ramifications for employers in the Sixth Circuit (which governs Michigan, Ohio and Tennessee) because for so long, the EPA has been lumped in with Title VII, ADEA and ADA, not the FLSA, for purposes of waiving claims, including by the Sixth Circuit. See EEOC v. Sundance Rehab. Corp., 466 F.3d 490, 499 (6th Cir. 2006) (“This court has upheld employees' waivers of claims under ADEA, EPA, and Title VII where the waiver was executed voluntarily and intelligently). See, e.g., Adams v. Philip Morris, Inc., 67 F.3d 580, 583 (6th Cir. 1995); Shaheen v. B.F.Goodrich Co., 873 F.2d 105, 107 (6th Cir. 1989). The question now becomes, how far will courts go with this? Will this mean that EPA claim are not waivable through traditionally-accepted means? Even the EEOC treats waivability under the EPA like it does Title VII, ADEA and ADEA claims. See EEOC Guidance – Understanding Waivers of Discrimination Claims in Employee Severance Agreements.

On a positive note—and I’m reaching here—employers should continue to seek to limit their liability for employment discrimination/retaliation lawsuits – specifically those under Title VII, ADEA, the ADA and comparable state law. One way to do this, though demonstrated somewhat incorrectly by the Boaz case, is by entering into employment agreements that shorten the statutory periods of limitations for discrimination/retaliation claims arising under waivable law, like Title VII, the ADA and the ADEA. The Sixth Circuit even said this was still okay in the Boaz decision itself.