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Attempts to Shorten Limitations for FLSA Claims Rejected

Posted on Mon, Aug 26, 2013 @ 06:43 AM

Jack B. Harrisonby Jack B. Harrison

United States Court of Appeals for the Sixth Circuit Rejects Attempts by Employers to Shorten the Limitations Period for Claims Under the Fair Labor Standards Act Through Employment Agreements

On August 6, 2013, the United States Court of Appeals for the Sixth Circuit issued a decision in Boaz v. FedEx Customer Information Services, Inc., in which the Court held that the inclusion of language in an employment agreement designed to shorten to six months the statute of limitations for bringing an employment claim did not waive the employee’s rights under the Fair Labor Standards Act (FLSA).

In Boaz, the plaintiff, Margaret Boaz, was employed by FedEx beginning in 1997.  The employment agreement that Ms. Boaz signed included the following language:

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.

In April, 2009, Ms. Boaz sued FedEx under the FLSA and the Equal Pay Act, a provision of the FLSA.  Ms. Boaz’s claims were based on allegations that, from January 2004 through June 2008, FedEx had paid her less than it had paid the male employee who previously held her position and who had performed the same duties.  Ms. Boaz claimed that these actions by FedEx violated the Equal Pay Act.  Additionally, Ms. Boaz claimed that FedEx had violated the FLSA by failing to pay her required overtime.

While Ms. Boaz’s claims under the FLSA were filed within the statute of limitations set forth in the FLSA (two years for non-willful violations and three years for willful violations), FedEx argued, in filing for summary judgment, that the six month statute of limitations contained in the employment agreement controlled.  FedEx asserted that the last illegal activity alleged in Ms. Boaz’s claim was the issuance of Ms. Boaz’s June 30, 2008 paycheck.  Because this occurred more than six months before Ms. Boaz filed suit, FedEx claimed that her FLSA claims were time barred under the terms of her employment agreement.  The district court held that the employment agreement superseded the statutory statute of limitations and dismissed Ms. Boaz’s claims as time barred.

On appeal, the United States Court of Appeals for the Sixth Circuit reversed the decision of the district court.  The Court of Appeals determined that the Supreme Court had previously held in Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697, 706–10 (1945), that employees could not waive their rights under the FLSA by contract.  In O’Neil, the Supreme Court had held that allowing such waivers would “nullify” the purpose of the FLSA 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.  In its decision, the Court of Appeals rejected FedEx argument that it could contractually shorten the limitations period for FLSA claims because courts previously have allowed employers to contractually shorten the limitations period for claims under Title VII of the Civil Rights Act of 1964.  The Court of Appeals rejected this argument by analogy, pointing out that the Supreme Court had already articulated the difference between claims under the FLSA and Title VII in Alexander v. Gardner-Denver Co., 415 U.S. 36, 52 (1974), as related to an employee’s waiver of rights.  According to the Supreme Court, an employer does not gain a competitive advantage by requiring employees to contractually waive rights under Title VII, but does gain such a competitive advantage by requiring the waiver of rights under the FLSA, in that such a waiver may allow an employer to pay less than minimum wage to its employees.

The decision in Boaz certainly does not eliminate advantages that may be gained by the inclusion of language in employment agreements that shorten the statute of limitations for employment claims.  In some cases, such as in the case of Title VII claims, such language may well be enforceable.  However, Boaz does point out the limits of such language in employment agreements.  Based on Boaz, prudent employers must understand that contractual language shortening the statute of limitations for employment claims is likely to be unenforceable as related to claims under the FLSA and/or the Equal Pay Act.  In those cases, if the employee’s claim is brought within the statutory statute of limitations, the employer must prepare to defend the claim.

 

Tags: 6th Circuit Court, FLSA

Improper Denial of Worker's Compensation Claim May Lead to Federal Court Suit

Posted on Tue, May 08, 2012 @ 01:45 PM

David J. Schmittby David J. Schmitt

An April 6, 2012 decision by the United States Court of Appeals for the 6th Circuit  in a worker’s compensation related case may have wide-ranging implications for Ohio employers.

The case of Brown v. Cassens Transport, et al, 2012 U.S. App. Lexis 6929 (6th Cir. 2012) arose out of work-related injuries suffered by claimants in Michigan. The employees sought workers compensation benefits under Michigan law, and their claims were denied by the employer’s third-party administrator (“TPA”). As a result, the employees filed suit in federal court against their employer, the TPA, and the doctor who evaluated their injuries (under contract to the employer). In the federal suit, the employees alleged that the defendants had conspired to fraudulently deny their claims, in violation of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).

Specifically, the employees alleged that Cassens and the TPA conspired by mail, wire, or other electronic means, to solicit fraudulent medical reports from the physician, who they also claim lacked the expertise in orthopedics necessary to properly evaluate their claims. They claim the doctor was biased by the money paid to him over the years by the employer and the TPA.

The federal district court dismissed the case for failure to state a claim. The 6th Circuit Court of Appeals, however, reversed stating that Supreme Court precedent indicates that RICO is to be read broadly and interpreted liberally. The 6th Circuit also found that the statutory entitlement to worker’s compensation benefits are property and therefore Michigan’s non-discretionary worker’s compensation scheme creates a property interest in the expectancy of worker’s compensation benefits.

Perhaps most importantly, the court found that “even if Michigan law does not create a property interest in such an expectancy, the plaintiffs’ claim for benefits is an independent property interest, the devaluation of which also creates an injury to property with the meaning of RICO.”

The 6th Circuit remanded the case to the district court for further proceedings, stating that for the workers’ RICO action to succeed they must prove that they suffered a quantifiable injury. They will have to show that they would have prevailed in the worker’s compensation claim or obtained a better outcome if not for the alleged fraud and conspiracy between the defendants.

What this means for employers: This decision creates the potential for a routine worker’s compensation case to quickly transform into a federal RICO lawsuit with the potential for triple damages and attorney’s fee awards. While not an exact duplicate, Ohio’s worker’s compensation system is similar to that of Michigan.

Since the 6th Circuit Court of Appeals governs Ohio (as well as Michigan, Tennessee, and Kentucky), employers would be wise to examine their relationships with their TPA’s and any physicians used regularly to evaluate workers compensation claimants to make sure that all of their dealings with these entities are arm’s length transactions.

Tags: 6th Circuit Court, Worker's Compensation, RICO, United States Court of Appeals, Brown v. Cassens Transport