Contractual Statute of Limitations

The United States Court of Appeals for the Second Circuit has upheld an arbitration provision which imposed a 300-day deadline to raise age discrimination claims. Abelar v. Int’l Bus. Machs. Corp. (In Re IBM Arb. Agreement Litig.) ( 2nd Cir. August 4, 2023).

Twenty-six former IBM employees signed Separation and Confidentiality Agreements requiring them to arbitrate any claims against IBM and setting a deadline for initiating arbitration.

Plaintiffs missed the deadline to initiate arbitration but nevertheless filed to arbitrate claims under the Age Discrimination in Employment Act (ADEA) anyway.

In all cases the arbitrators dismissed their claims as untimely.

The Plaintiffs then filed individual cases in district court for the Southern District of New York seeking a declaration that the timeliness provision in the Agreements was unenforceable.

Many federal courts have adopted a judicial exception to statutory filing deadlines called the “piggybacking rule” where when a plaintiff has filed a timely EEOC complaint, other non-filing plaintiffs may join in the action if their individual claims arise out of similar discriminatory treatment in the same time frame. The reason for the exception is that it would be “wasteful” to require all claimants to file individual charges.

Plaintiffs urged the piggybacking rule should be applied to their situation in the arbitration context since there had been timely filed claims for age discrimination by others.

Affirming the district court’s granting IBM’s motion to dismiss, the Second Circuit held that the piggyback rule does not apply to arbitration context. It is an exception to the ADEA’s administrative-exhaustion requirements which expressly applies only to “civil action(s)” – and does not apply in the arbitration context. The Second Circuit also observed the piggybacking rule is not a substantive right under the ADEA and is thus waivable under the Agreement between the parties.