A recent appeals court ruling provides important guidance to employers hoping to reduce employee lawsuits by contractually shortening the time they have to bring their claims.

In Rodriguez v. Raymours Furniture Co., Inc., the Appellate Division of the New Jersey Superior Court held that a waiver in the company’s employment application, which shortened the limitations period for employment claims to six months, was reasonable and enforceable, even though the statutory limitations period for the claims at issue was two years. The court noted that the waiver was clear, prominent and obvious (in BOLD AND CAPITAL LETTERS), and that six months was not unreasonable, since the limitations periods under some state employment laws (as well as some federal laws, we might add) is 180 days. The court also pointed out that the employee was given the opportunity to take the application home to review before signing it. Moreover, the U.S. Supreme Court, the New Jersey Supreme Court, and courts in other states – including New York – have expressly approved reasonable contractual limitations on the time to sue.

Guided by this decision, employers should consider inserting prominent waivers in their employment applications and employment agreements to reduce the limitations periods on employee claims. This also serves as a reminder for employers to consider other favorable terms, including the waiver of a right to a jury trial and a requirement for alternative dispute resolution.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.