California Court of Appeal Holds Employer Cannot Shorten Statute of Limitation on California Discrimination and Retaliation Claims

3 minute read | April.01.2014

Can employers enter into binding agreements with employees to shorten the statute of limitations on discrimination and other employment claims? A California Court of Appeal decision answered that question with a resounding “no” in a recent case, reinstating claims by a woman who filed suit prior to the expiration of the applicable statute of limitations, but after the deadline she had agreed to in an employment agreement signed at the time of hire.

Ashley Ellis began working for U.S. Security Systems in September 2009. At the time of her application Ellis signed a four-page employment agreement that included the statement “I understand, agree and acknowledge that any claim or lawsuit relating to my service with [U.S. Security] must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.”

Shortly after being promoted in early 2010, Ellis’ supervisor allegedly invited Ellis to join him and his wife in sexual activities, and allegedly continued to make sexual comments and gestures towards Ellis after she declined. According to the decision, after other female employees complained about the supervisor, and Ellis notified the company that the supervisor had transferred her and another complaining employee to less desirable job locations, the company fired the supervisor in December 2010. Following the supervisor’s termination, Ellis received a promotion, but she resigned on January 13, 2011, after she did not receive a pay raise she claimed to have been promised. Ellis filed a complaint with the California Department of Fair Employment and Housing (DFEH), and, on December 14, 2010, she received a right-to-sue letter from the DFEH. She then filed suit against U.S. Security Systems and the supervisor on November 17, 2011. Her lawsuit included three causes of actions brought under the Fair Employment and Housing Act (FEHA) and two non-statutory causes of action. U.S. Security filed a motion for judgment on the pleadings, arguing that Ellis’ suit was time-barred by the provision in her employment application. The trial court granted U.S. Security System’s motion and ordered Ellis’ complaint dismissed. Ellis then appealed.

In its order, the appellate court stated its strong disagreement with the trial court and found the contract provision unreasonable because the time to sue was too short and therefore it violated public policy. The appellate court explained that FEHA already sets out a specific time limit for commencing litigation[1], and requires employees to first exhaust their administrative remedies before filing suit. The court pointed to the public policy reason for this time limit, namely the protection of an employee’s rights to pursue a judicial remedy.

The Court found that the six month time limit did not provide enough time for Ellis to effectively pursue a judicial remedy because it essentially thwarted any sort of administrative enforcement or involvement by the DFEH. The court also emphasized the significance of the DFEH’s involvement, both for the employee and the employer. It reduced the time to sue allowed by the FEHA by almost five-sixths, and did not provide Ellis much time to investigate and evaluate the facts and properly prepare her complaint.

This case serves as a warning to both California employers and employers in other states with administrative employment agencies. Employers should carefully consider the court decisions from the relevant jurisdictions before attempting to shorten the time to sue under a statute that requires participation by an administrative agency, such as the EEOC or the DFEH.

[1] Under FEHA, an employee is required to file an administrative claim with the DFEH within one year from the date of the wrongful act.  The employee then has one year from the date on which the DFEH issues a right-to-sue letter to file a complaint.