A new Kentucky law that took effect last month places limits on an employer’s ability to require employees, as a condition of employment, to submit to mandatory arbitration to resolve future employment disputes. Another part of the same law, however, also allows employers and employees to agree to shorten the limitations period for an employee to file legal claims against the employer.
Reducing limitations periods
The bill allows an employer, in an employment agreement presented as a condition of employment, to “reasonably reduce” the period of time within which the employee may file a suit against the employer. The time deadline for filing a lawsuit for violating an employment law is called the “statute of limitations” or limitations period.
The new law restricts how an employer may impose in an employment agreement a reduction in the statute of limitations:
- The reduction must be reasonable.
- The reduction may not be for more than half of the time of the limitations period.
- The agreement to reduce statutes of limitation does not apply to a suit under a state or federal law that prohibits such a reduction or preempts the agreement.
KCRA time limits
This will often come up under the Kentucky Civil Rights Act, under which an employee must normally file a lawsuit against an employer for illegal discrimination, harassment, or retaliation within five years of a discriminatory event. Or, if there is an ongoing pattern of unlawful harassment or discrimination, such as when a hostile work environment exists, the “continuing violation doctrine” allows the statute of limitations to be calculated from the last incident that happened.
Under the new law, an employer could not require a reduction of the limitations period under the KCRA any more than 2.5 years, one half of the five-year deadline.
Bill applies broadly
The bill applies “prospectively and retroactively.” For a statute of limitations reduction in an employment agreement signed before the law took effect, if that clause violates the lawsuit deadline provisions of the bill, that clause will be stricken from the agreement, leaving the rest valid.
Any Kentucky employer with questions about statute-of-limitations reduction clauses and the effect of the new law should talk to an experienced employment lawyer.