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First Circuit holds that arbitrator must decide whether an employer can shorten statute of limitations with arbitration “agreement”

Last week, the First Circuit Court of Appeals, which rules on federal appeals from Maine, other New England states, and Puerto Rico, held that an arbitrator would need to decide whether an employer’s arbitration agreement could shorten the statute of limitations on claims against it.

In this case, the plaintiff claimed that his former employer, a hotel in Puerto Rico, unlawfully retaliated against him because he filed a discrimination complaint with the U.S. Equal Employment Opportunity Commission (EEOC). As a condition of his employment, the hotel had required the employee to sign an arbitration “agreement.” (It is called an “agreement” even though employees usually don’t have much choice but to agree because, if they don’t, the employer won’t hire them.) Arbitration agreements require employees to bring claims against their employers before a private arbitrator, instead of before a public court. The particular arbitration agreement at issue in this case also shortened the statute of limitations for the employee’s retaliation claim from 3 years to 1 year. If enforced, this shortened statute of limitations would bar the employee’s claim.

Some courts have held that employers cannot legally use an arbitration agreement to shorten the statute of limitations of claims against it. The First Circuit, however, decided that in this case the arbitrator, instead of the court, would need to decide whether it was legal for the employer to shorten the statute of limitations. Employers prefer arbitrators to make these decisions, in part, because they usually pay the arbitrators and they bring arbitrators repeat business. So, arbitrators have a financial incentive to side with employers.

If your employer has violated your rights and you had to sign an arbitration agreement as a condition of your employment, you should contact an experienced employment lawyer to determine whether the arbitration agreement you signed is enforceable.