Shortened Statute of Limitations for Arbitration Agreement Is Enforceable
The U.S. District Court for the District of Maryland held that an arbitration agreement containing a shortened one-year statute of limitations to file an arbitration claim over any employment-related disputes is enforceable, resulting in the dismissal of the employee’s lawsuit.
In Bracey v. Lancaster Foods, LLC, the employee was required, as a condition of employment, to sign an arbitration agreement that had a one-year statute of limitations for bringing employment-related claims. When he was terminated, he filed a charge with the Equal Employment Opportunity Commission, which took several years to be resolved by the EEOC. Upon receiving his notice of right to sue from the EEOC, he filed suit. The employer filed a motion to dismiss and compel arbitration.
The court noted that, under Maryland law, requiring an applicant to sign an arbitration agreement as a condition of employment constitutes a contract of adhesion and is procedurally unconscionable. However, for that agreement to be invalid, it must also be substantively unconscionable, which this agreement was not, because parties can agree by contract to shorten statutory limitations periods. The court found that the shortened one-year statute of limitations was enforceable, and that waiting to exhaust the EEOC’s charge process did not excuse the failure to request arbitration in a timely manner. Additionally, the court awarded attorneys’ fees to the employer because the agreement provided for such an award where one party seeks relief in a judicial forum and the other party prevails in having that matter dismissed.