Michigan Supreme Court Changes Analysis of Shortened Limitations Periods

Recently, the Michigan Supreme Court issued a significant decision in Rayford v. American House Roseville, LLC, reshaping how courts evaluate contractual provisions that shorten the statute of limitations for employment-related claims under state law. 

For years, Michigan employers have relied on standard employment applications, contracts, and handbook acknowledgments to impose six-month or 180-day limitations periods—well short of the statutory defaults (often three years). These provisions were regularly upheld by the courts. The Rayford case involved an employee who filed suit nearly three years after her termination for alleged retaliation. Although the trial court dismissed her claims based on the contractual time limit, the Michigan Supreme Court reinstated the case, establishing a new, more demanding legal standard for enforcing such limitations provisions.

Automatic Enforcement No Longer Guaranteed

In Rayford, the Court held that, while employers and employees may still agree to shortened limitation periods, those provisions are no longer presumed enforceable—particularly when found in non-negotiated, boilerplate employment documents. The Court categorized such clauses as standard form or adhesion contracts that must undergo a fact-specific reasonableness analysis before being enforced. This decision expressly overruled prior precedent, including Clark v. DaimlerChrysler and Timko v. Oakwood Custom Coating, which had upheld six-month limitations clauses without requiring a contextual or individualized review.

The New Reasonableness Test

Courts applying Rayford will now assess whether the contractual limitations period is fair and enforceable based on three factors:

1. Time to Investigate and File: Did the employee have a meaningful opportunity to explore and pursue a claim?
2. Access to Relief: Is the period so short that it effectively eliminates the right of action?
3. Timing of Harm: Does the limitation bar the claim before the employee could reasonably identify the harm?

The Court also clarified that traditional contract defenses, such as unconscionability, are available as an argument to avoid a contractual limitations provision. Accordingly, Rayford introduces a broader and more employee-friendly framework, lowering the barrier for plaintiffs to challenge limitations clauses that were once routinely enforced.

What Employers Should Do Now

Employers are still allowed to include shortened timeframes for filing claims.  In light of the Rayford decision, however, employers should not assume enforcement absent a supporting factual record. To mitigate risk, employers should:

• Review existing employment agreements, handbooks, and acknowledgment forms containing shortened limitations provisions.
• Evaluate whether such clauses are clearly disclosed, presented in a non-coercive manner, and provide a reasonable window for filing.
• Consider revising the language to reflect transparency and fairness, or extending the period to withstand judicial scrutiny.

For guidance on reviewing or revising your agreements in light of this decision, contact one of Honigman’s Labor and Employment attorneys here.