On July 31, 2025, the Michigan Supreme Court issued a pivotal decision in Rayford v. American House Roseville I, LLC, addressing whether an employer can enforce contractually shortened statute of limitations period applicable to civil rights claims through an employment agreement. The ruling reshapes the legal landscape, requiring courts to scrutinize such clauses for fairness and reasonableness, and overturning prior precedents that upheld them without meaningful review.
The case before the Court involved an employee, Timika Rayford, who at the time of hiring in February 2017 signed an employment agreement acknowledging a 180-day limitations period for employment related claims. She was terminated on July 2017, after reporting alleged misconduct between management and staff, and claimed she faced retaliation from the human resources department. In April 2020, just within Michigan’s statutory three-year limitations period, Rayford filed suit alleging retaliation, race and gender-based harassment, and hostile work environment under the Elliott-Larsen Civil Rights Act, wrongful discharge, malicious prosecution, and abuse of process.
Rayford challenged the enforceability of the 180-day limitations clause in her employment agreement, arguing it was unconscionable, a contract of adhesion, and conflicted with the statutory three-year limitations period in MCL 600.5805(2). Both the trial court and Court of Appeals dismissed the suit citing the 180-day contractually shortened limitations period.
However, the Michigan Supreme Court overturned the lower courts, overruling Clark v. Daimler Chrysler and Timko v. Oakwood Custom Coating, that upheld such clauses without scrutiny.
In reviewing these cases, the Court held when a contract is an “adhesion contract” i.e., a standard form contract prepared by one party, to be signed by another party in a weaker position, it must undergo a reasonableness review. The Court reinstated the Camelot Excavating Co. and Herweyer v. Clark Hwy Servs. framework, requiring a reasonableness analysis which asks:
- Did the Claimant have sufficient opportunity to investigate and file a claim?
- Was the time so short that it practically abrogated the right of action?
- Could the action be barred before the harm or loss was ascertainable?
It also introduced an unconscionability test for adhesion contracts:
- Procedural unconscionability – was there a lack of meaningful choice and/or did the employee lack have bargaining power?
- Substantive unconscionability test – are the terms so one-sided they “shock the conscious” in its fairness.
In Rayford, the Court found the 180-day statute of limitations in the employment agreement to be adhesive, and warranted close judicial scrutiny. It remanded the case to the trial court to determine whether the clause was reasonable and substantively unconscionable, and if so, it would default to the three-year statute of limitations.
This decision sends employers a clear message that boilerplate contracts will no longer be automatically enforceable. Employers must now demonstrate that such clauses are fair and appropriate given the specific employment context. This ruling may also influence judicial scrutiny of other common provisions such as arbitration clauses, jury trial waivers, and class-action bans. Employers are encouraged to review their contracts to ensure compliance with current laws and alignment with best practices.
