Michigan Supreme Court Limits Contractually Shortened Limitations Periods
For decades, employers and employees have contractually agreed to shorten the amount of time that an employee has to bring a claim or lawsuit against the employer. These “contractually shortened limitations periods,” which are usually included in employment applications, handbook acknowledgments, or other employment contracts, make good sense. The statute of limitations for most employment claims under Michigan law is three years. Shortening the limitations period to something more manageable helps prevent individuals from bringing “stale” claims long after memories have faded and relevant witnesses have moved on. Under this theory, Michigan courts routinely enforced contractually shortened limitations periods of 180 days.
Until now.
On July 31, 2025, the Michigan Supreme Court overruled its prior decisions and upended this well-settled area of the law.
The MSC held that employees are in a weaker bargaining position than employers, which means that most employment contracts are “adhesion” contracts (a “standard-form contract prepared by one party, to be signed by another party in a weaker position”). And because employment contracts are adhesion contracts, they are subject to “heightened judicial scrutiny” to determine whether they are reasonable.
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Practically, here’s what it means: before the July 31 decision, courts enforced 180-day contractually shortened limitations periods. The issue was simple and straightforward. Now, before courts can enforce a contractually shortened limitations period, they must engage in a three-factor analysis to determine if the period is reasonable:
- Did the individual have a sufficient opportunity to investigate and file an action?
- Was the time so short that it worked as a practical bar to filing a claim?
- Was the action barred before the individual could determine they suffered a loss or damages?
According to the MSC, this three-factor reasonableness analysis “clearly require[s] the development of a full record.” Courts will have to analyze things like when the employee discovered they had a potential claim against the employer, when they hired an attorney, when they learned of the contractually shortened limitations period, the steps they needed to take to file a claim, how long those steps usually take, and when they were able to assess their damages – both economic and non-economic, like emotional distress. Thus, the MSC’s new analysis will require employers to engage in time-consuming and expensive litigation just to get to the threshold issue of timeliness.
Finally, the MSC did not specifically hold that a 180-day limitations period is unreasonable, because that issue was not up for the Court’s review. But it tipped its hand, writing that “[t]he difference between an employee having three years to file a lawsuit, as opposed to just six months, cannot be understated.” It seems clear how the MSC will rule if or when the issue is before it.
So what does this mean for employers? Contractually shortened limitations periods are still theoretically enforceable, so we don’t recommend giving up all hope. But if you have contractual limitations and rely on them, we recommend discussing with your employment counsel how those clauses are presented to applicants and employees and whether you should consider a different time period.
If you have questions, please contact the author or a member of Miller Johnson’s Employment and Labor practice group.