Statute of Limitations - In Tennessee can parties to an employment contract create a shorter length statute of limitations (six months) for a retaliatory discharge claim?

Brief Summary:  The recent Tennessee Court of Appeals decision of Karim Skaan v. Federal Express Corporation, No. 2011-01807-COA-R3-CV, 2012 WL 6212891 (Tenn. Ct. App. December 13, 2012) discussed whether parties can shorten a statute of limitations time period for a retaliatory discharge claim in an employment contract.  The pertinent facts for purposes of this post are that Federal Express hired Mr. Skaan in 1999 as an employee and in the employment paperwork Mr. Skaan signed an employment agreement.  Skaan at 1, 2.  Paragraph 15 of the employment agreement provided as follows:

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.

Skaan at 2.  As a result, the plain language of the employment agreement requires that any legal action against Federal Express Corporation by the employee must be filed within six months of the date of the event forming the basis of the lawsuit (or the time period could be even less than six months if the law provides).  Skaan at 2.  Mr. Skaan was terminated from his job by Federal Express.  He claimed he was terminated due to the filing of a workers compensation claim.  Skaan at 2.

Mr. Skaan did not file any claim against Federal Express until eight months after his termination from his employment.  Skaan at 2.  This case has lots of facts and interesting information pertaining to what evidence was presented on appeal however for our purpose the issue we are discussing in this post simply pertains to whether the modification of the statute of limitations for retaliatory discharge to a six months statute of limitations was acceptable under Tennessee law.  The Tennessee Court of Appeals noted that:

It is well established that a contractual provision setting a time limitation for bringing a legal action arising out of that contract is not inherently unconscionable.  The United States Supreme Court has explained: “[A] provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.” Order of United Commercial Travelers of Am. v. Wolfe, 331 U.S. 586, 608 (1947); Harris v. Provident Life and Accident Ins. Co., No. E2007–00157–COAR3–CV, 2008 WL 1901110, at *9 (Tenn.Ct.App. Apr. 30, 2008) (stating that “[p]arties are free ... to contract for a shorter [limitation] period, unless a statute specifically forbids them from doing so”).

FedEx cites several cases specifically holding that a contractual six-month time limitation for filing a lawsuit is reasonable. Myers v. Western–Southern Life Ins. Co., 849 F.2d 259, 262 (6th Cir.1988) (holding that “[t]here is nothing inherently unreasonable about a six-month limitations period”); see Thurman v. DaimlerChrysler, Inc., 397 F.3d 352, 357 (6th Cir.2004) (same); AMOCO Canada Petroleum Co. v. Lakehead Pipe Line Co., 618 F.2d 504, 506 (8th Cir.1980) (stating that “courts almost invariably uphold contractual limitation periods of six months or more”). Indeed, this Court has held that a contractual limitation period of less than six months is enforceable. See Morgan v. Town of Tellico Plains, No. E2001–02733–COA–R3–CV, 2002 WL 31429084, at *5 (Tenn.Ct.App. Oct. 30, 2002) (upholding a 60–day contractual limitation period).

The Tennessee Court of Appeals therefore found the six month limitation period found in the employment agreement was enforceable and the retaliatory discharge claim was barred on this basis.  This case provides a good summary of authority in Tennessee and other jurisdictions that allow parties to a contract to reduce the statute of limitations time period for disputes that may arise from the agreement.  This is an important consideration when drafting or reviewing a contract.  If the statute of limitations time period is reduced by the contract, it will be considered enforceable as long as the time period is reasonable.  In Tennessee a six month contractual statute of limitations will almost always (if not always) be deemed enforceable.