Opinion
NO. 2018-CA-001351-MR
02-14-2020
Steven CROGHAN, Administrator of the Estate of Amy L. Croghan, Appellant v. NORTON HEALTHCARE, INC.; Vicki Thieneman; Casey Maudlin; and Kimberly Brannon, Appellees
OPINION
: Steve Croghan, as Administrator of the Estate of Amy L. Croghan ("the Estate") appeals from a summary judgment entered by the Jefferson Circuit Court dismissing the Estate's employment-discrimination claims against Norton Healthcare, Inc. and individual defendants (collectively, "Norton"). The trial court found that the Estate's claims brought under the Kentucky Civil Rights Act (KCRA) were time-barred based on a contractual six-month limitation period for bringing claims arising from the employment. While this appeal was pending, the legislature amended KRS 336.700 to contain language which would bar enforcement of the contractual provision. We conclude that the amendment is applicable to this action. Furthermore, we agree with the Estate that this period is not a sufficient time to conduct a reasonable investigation and to file a KCRA action in good faith. Therefore, we conclude that the provision is not enforceable with respect to the Estate's KCRA claims and the trial court erred by dismissing the complaint as untimely. Hence, we reverse and remand for additional proceedings on the merits of these claims.
Kentucky Revised Statutes.
The relevant facts of this action are as follows. On December 3, 2008, Amy L. Croghan ("Croghan") applied for a position as a Registered Nurse in the oncology radiation department at Norton Suburban Hospital. At the time she applied, the electronic employment application contained the following language:
I agree that any claim or lawsuit relating to my service with Norton Healthcare, Inc., [sic ] or any of its subsidiaries or related entities must be filed no more thansix [sic ] (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary. Mysignature [sic ] certifies that I have read and understand the contents of this employmentapplication [sic ], and that I am fully able and competent to complete it and that the statementsI [sic ] made herein are true.
Just below the paragraph was a box with a sentence stating, "By checking this box I acknowledge that all information submitted is true and complete." The paragraph also required Croghan's signature and a date. Croghan checked the box and signed the page, along with several other pages on the application.
Norton hired Croghan and she began her employment at Norton Suburban Hospital on January 12, 2009. She alleges that she was subjected to age discrimination while working there. In late 2012, Croghan transferred to a position at the Norton Northeast Radiation Center. At this facility, Croghan was working under the lead physician, Dr. Kristie Paris. In early 2014, Vicki Thieneman became the nurse manager for the center and assumed supervisory responsibility over Croghan. Croghan also worked with Casey Maudlin, who served as the chief radiation therapist/manager at the center, and communicated with Kimberly Brannon, who served as an employee relations manager for Norton. Croghan alleged that Maudlin was hostile to anyone who was older than sixty and overweight, including both her and Dr. Paris. Croghan alleges that Maudlin scheduled her patients at odd hours and required her to perform secretarial tasks and duties not expected of other nurses. Croghan states that she complained about the working conditions to Brannon, but nothing ever came of it and her working conditions became more difficult.
The Appellee's name appears to be misspelled on the notice of appeal. We have adopted the spelling used throughout the trial court record.
Dr. Paris left the facility in the summer of 2015. On August 3, 2015, Croghan received a fax from a drug store seeking to verify Dr. Paris's prescription refill for magnesium. Croghan provided the verification without seeking authorization from an on-staff physician, as required by Norton's policies. Two days later, Norton suspended Croghan for this conduct. After additional review, Norton terminated Croghan on August 10.
Thereafter, Croghan filed for unemployment benefits, which Norton contested. In October 2015, the Unemployment Insurance Commission determined that Croghan's actions did not constitute misconduct related to employment sufficient to disqualify her from receiving benefits. In addition, Norton reported Croghan's conduct to the Kentucky Board of Nursing and directed her to self-report the incident. However, the Board declined to pursue any disciplinary action.
On April 4, 2016, Croghan filed this action against Norton, Thieneman, Maudlin and Brannon. In relevant part, she asserted claims under the KCRA for age discrimination, disability discrimination, hostile work environment and retaliation. Following Croghan's death, the trial court granted leave to substitute Steve Croghan, as Administrator of her Estate, as a party to the action. Thereafter, Norton and the individual defendants moved for summary judgment, arguing that the action was untimely because Croghan failed to file it within six months of her termination as required by the provision in her employment application.
Croghan separately asserted claims for intentional infliction of emotional distress, civil conspiracy, and promissory estoppel. She also asserted separate claims for hostile work environment against Thieneman, Maudlin and Brannon individually. Croghan voluntarily dismissed her emotional distress claim, and the other claims were dismissed on summary judgment prior to the dismissal of this action. These claims are not the subject of this appeal.
After considering Norton's motion and the Estate's response, the trial court agreed. The court first found that Croghan made a knowing and voluntary waiver of the statutory limitation period when she signed the provision in her employment application. The court further found that six months is a reasonable amount of time to assert the claims at issue in this case. The court also found that the limitation period was not tolled during the time that Norton contested Croghan's claim for unemployment benefits. Based on these findings, the trial court granted Norton's motion for summary judgment and dismissed Croghan's complaint.
Claims brought under the KCRA, KRS 344.010, et seq. , are subject to the five-year limitation period provided for statutory causes of action in KRS 413.120(2). See Kentucky Comm'n on Human Rights v. City of Owensboro , 750 S.W.2d 422, 422 (Ky. 1988). The question in this case is whether an employer may require the employee to waive the statutory limitation period and accept a shorter period. As this is entirely a question of law, our review is de novo and without deference to the trial court's conclusions. Gosney v. Glenn , 163 S.W.3d 894, 898-99 (Ky. App. 2005).
At the time the summary judgment motion was pending, there was no controlling Kentucky authority directly addressing this issue. Consequently, the trial court cited to Dunn v. Gordon Food Services, Inc. , 780 F. Supp. 2d 570 (W.D. Ky. 2011), which considered whether an employee may waive the KCRA limitation period in favor of a shorter period. In Dunn , the employment application required that any claim arising out of the employment, including KCRA claims, must be brought within one year of the event giving rise to the claim. The Western District of Kentucky concluded that Kentucky law would permit a waiver of a statute of limitations in an employment application even though it is a unilateral condition of employment. Id. at 575-76. The court went on to address whether the waiver was knowing and voluntary and whether the contractual limitation period was reasonable. After finding both under the facts of that case, the federal court concluded that the employee's waiver of the statutory limitation period was reasonable. Id. at 576-77.
The holding of Dunn is consistent with Sixth Circuit precedent upholding the enforceability of similar waivers of statutory limitation periods. In Myers v. Western-Southern Life Ins. Co. , 849 F.2d 259, 261-62 (6th Cir. 1988), the Sixth Circuit addressed an age and disability discrimination claim brought under Michigan law. The employment application, like the one in the current case, required that any claim relating to the employment must be brought within six months after termination of employment. The Sixth Circuit first found that the provision was not void as against public policy. Id. at 261-62. The court next found that the contractual language was clear and the employee's acceptance of the term was knowing and voluntary. Id. at 262. And lastly, the court concluded that a six-month limitation period was not inherently unreasonable. Id. See also Thurman v. DaimlerChrysler, Inc. , 397 F.3d 352 (6th Cir. 2004).
Furthermore, the United States Supreme Court has held that an insurance contract provision may serve to shorten the time for bringing an action to a lesser period than the time that is prescribed by statute, as long as "the shorter period itself [is] a reasonable period." Order of United Commercial Travelers of Am. v. Wolfe , 331 U.S. 586, 608, 67 S. Ct. 1355, 1365, 91 L. Ed. 1687 (1947). Most other jurisdictions also have upheld contractual waivers of the statute of limitations under similar circumstances. See Soltani v. W. & S. Life Ins. Co. , 258 F.3d 1038, 1043-44 (9th Cir. 2001) ; Hunter-Boykin v. George Washington Univ. , 132 F.3d 77, 79 n.1 (D.C. Cir. 1998) ; Taylor v. W. & S. Life Ins. Co. , 966 F.2d 1188, 1206 (7th Cir. 1992) ; and Hays v. Mobil Oil Corp. , 930 F.2d 96, 99-100 (1st Cir. 1991). Indeed, this Court has held that, where there is no statute prohibiting the contractual shortening of a statutory period of limitation, a contractual limitation in an insurance contract is not in conflict with statutes providing for longer periods of limitation. Webb v. Kentucky Farm Bureau Ins. Co. , 577 S.W.2d 17, 18 (Ky. App. 1978).
But see KRS 304.14-370, which prohibits a contractual limitation on actions against foreign insurers for a period of less than one year from the time the cause of action accrues.
We are mindful that the provision at issue in this case was part of an adhesion contract and was presented as a condition of employment. Furthermore, the KCRA expresses a strong public policy against employment discrimination. Moreover, Section 14 of the Kentucky Constitution guarantees that "[a]ll courts shall be open, and every person for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law, and right and justice administered without sale, denial or delay." However, the General Assembly has recently addressed this issue through its enactment of 2019 Ky. Acts ch. 75 (SB 7) (effective June 27, 2019). In pertinent part, KRS 336.700(3)(c) now provides:
Any employer may require an employee or person seeking employment to execute an agreement to reasonably reduce the period of limitations for filing a claim against the employer as a condition or precondition of employment, provided that the agreement does not apply to causes of action that arise under a state or federal law where an agreement to modify the limitations period is preempted or prohibited, and provided that such an agreement does not reduce the period of limitations by more than fifty percent (50%) of the time that is provided under the law that is applicable to the claim[.]
In enacting the amendment to KRS 336.700, the General Assembly has clearly stated that the public policy of this Commonwealth permits an employment contract requiring an employee to accept a reduced limitation period for a cause of action arising out of the employment. Furthermore, KRS 336.700(8) provides that "[t]his section shall apply prospectively and retroactively." Under the plain language of the statute, the provision in Croghan's employment application is not void as against public policy.
But, as quoted above, KRS 336.700(3)(c) precludes enforcement of an employment agreement which reduces the period of limitation by more than 50% of the statutory time allowed. And KRS 336.700(8) further provides:
Any provision of an agreement executed prior to June 27, 2019, that violates the requirements of subsection (3)(c) of this section shall be stricken from the agreement and shall not operate to invalidate the entire agreement.
By its express terms, the amended version of KRS 336.700 applies to all contracts entered before or after the statute's effective date of June 27, 2019. Since the statutory limitation period for KCRA claims is five years, the statute prohibits any shortening of the limitation period for such claims to less than two and a half years. Any contrary provision is not enforceable.
Norton first argues that the General Assembly cannot retroactively modify a limitation period to revive a claim after the limitation period has expired. Officeware v. Jackson , 247 S.W.3d 887, 890 (Ky. 2008). However, this rule applies only to statutory limitation periods. A contractual provision shortening the limitation period does not extinguish the cause of action, but only acts as a defense to the claim among the parties to the contract. Thus, the rule does not apply when the underlying claim is barred only by the application of a contractual provision providing for a shorter period.
We note, however, that the amended statute could not revive a claim which was time-barred by a contractual provision but was finally adjudicated prior to the effective date of the statute.
Norton also argues that a retrospective application of KRS 336.700 would unconstitutionally impair the obligation of a contract, in violation of Section 19 of the Kentucky Constitution. While the legislature may regulate the remedy and the methods of procedure under a past as well as a future contract, it cannot impose new restrictions upon the enforcement of a past contract, so as materially to lessen its value and benefit to either party. Maze v. Bd. of Directors for Commonwealth Postsecondary Educ. Prepaid Tuition Tr. Fund , 559 S.W.3d 354, 369 (Ky. 2018) (citing Kentucky Utilities Co. v. Carlisle Ice Co. , 279 Ky. 585, 131 S.W.2d 499, 504 (1939) ). But as discussed above, the enforcement of a contractual provision shortening a limitation period has always been subject to review for reasonableness. By amending KRS 336.700, the legislature has simply specified the scope of the reasonableness inquiry. Therefore, we cannot find that retroactive application of the statute would impair Norton's vested rights.
In addition to the authority discussed above, the version of KRS 336.700(2) in effect at the time Croghan signed the contract provided that
no employer shall require as a condition or precondition of employment that any employee or person seeking employment waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled under any provision of the Kentucky Revised Statutes or any federal law.
And even absent the statute, we agree with the Estate that six months is not a reasonable period to bring a KCRA claim. As a general rule, a contractual period of limitation "is reasonable if (1) the claimant has sufficient opportunity to investigate and file an action, (2) the time is not so short as to work a practical abrogation of the right of action, and (3) the action is not barred before the loss or damage can be ascertained." Timko v. Oakwood Custom Coating, Inc. , 244 Mich. App. 234, 239-40, 625 N.W.2d 101, 104 (2001) (quoting Herweyer v. Clark Highway Services, Inc. , 455 Mich. 14, 20, 564 N.W.2d 857, 859 (1997) ). But see Rory v. Cont'l Ins. Co. , 473 Mich. 457, 470, 703 N.W.2d 23, 31 (2005) (rejecting a reasonableness inquiry in a contractually-shortened limitation period). See also Davies v. Waterstone Capital Mgmt., L.P. , 856 N.W.2d 711, 718 (Minn. App. 2014) ; Ellis v. U.S. Sec. Assocs. , 224 Cal. App. 4th 1213, 1222-23, 169 Cal. Rptr. 3d 752, 757-58 (2014) ; Holcomb Condo. Homeowners’ Ass'n, Inc. v. Stewart Venture, LLC , 129 Nev. 181, 300 P.3d 124, 129 (2013) ; and Hatkoff v. Portland Adventist Med. Ctr. , 252 Or. App. 210, 222, 287 P.3d 1113, 1121 (2012). If the amended version of KRS 336.700(3)(c) does not apply, then this test is applicable to determine the reasonableness of the limitation period provided in Croghan's employment contract.
"Public policy requires that all persons be able to freely resort to the courts for redress of a wrong[.]" Raine v. Drasin , 621 S.W.2d 895, 899 (Ky. 1981), abrogated on other grounds by Martin v. O'Daniel , 507 S.W.3d 1 (Ky. 2016). But likewise, a party and his or her counsel must conduct a reasonable investigation into the facts and law supporting the claim before filing an action. CR 11. A contractual limitation period which requires a claimant to bring an action prematurely and without adequate investigation places an undue burden on our courts and effectively abrogates the statutory right.
Kentucky Rules of Civil Procedure.
The trial court noted that an individual claiming to have been aggrieved by certain unlawful practices under the KCRA may seek administrative relief from the Kentucky Commission on Human Rights, but that complaint must be filed within one-hundred eighty days after the alleged unlawful practice occurs. KRS 344.200(1). However, the Commission's procedure is necessarily a much less formal proceeding which may be brought before all facts have been developed. The statutory procedure contemplates that the staff investigation may uncover additional facts which would support a finding of probable cause that the employer engaged in unlawful discrimination. The matter cannot proceed to a full hearing before the Commission until that probable-cause determination is made. Kentucky Comm'n on Human Rights v. Fraser , 625 S.W.2d 852, 853 (Ky. 1981) (citing KRS 344.210, .230 & .240). Therefore, the six-month period for filing a claim with the Commission is not comparable to the six-month limitation period provided under Croghan's contract.
The Estate also argues that any contractual limitation period was tolled during the time that Norton contested Croghan's unemployment claim. While we will not directly address that argument, the pendency of that matter demonstrates the need for a reasonable period to investigate the sufficiency of a claim. Specifically, a finding by the Commission that the employee was discharged for misconduct would be relevant in determining the sufficiency of the evidence to bring a KCRA claim.
Unlike in Thurman , Croghan's claims are not based on discrete episodes of workplace harassment and the employer's response to those episodes. Rather, Croghan alleges hostile work environment over a period of several years and culminating in her termination on contrived grounds. Considering the complexity of Croghan's claims, like many other KCRA claims, we cannot find that six months afforded her a sufficient opportunity to investigate her claims and to file a civil action in good faith.
Based upon these factors and the recent amendment to KRS 336.700(3)(c), we conclude that the six-month period for bringing a claim arising out of the employment is not enforceable with respect to Croghan's KCRA claim. Given this conclusion, we need not address whether the shorter time period was tolled based upon Norton's post-termination conduct, or whether the shorter period was applicable to Croghan's claims against the individual defendants. We merely hold that Croghan's KCRA claims are not barred by the six-month limitation period provided in her employment contract. Therefore, the trial court erred in granting summary judgment for Norton, and this matter must be remanded for further proceedings on the merits of those claims.
Accordingly, we reverse the summary judgment entered by the Jefferson Circuit Court and we remand for additional proceedings on the merits of the Estate's claims.
COMBS, JUDGE, CONCURS.
ACREE, JUDGE, CONCURS IN RESULT ONLY AND FILES A SEPARATE OPINION.
ACREE, JUDGE, CONCURRING IN RESULT ONLY.
The majority opinion is well written and thorough. However, I believe it includes unnecessary dicta.
This Court's review needed only to consider whether a provision of Croghan's employment agreement "reduce[s] the period of limitations by more than fifty percent (50%) of the time that is provided under the law that is applicable to the claim[.]" KRS 336.700(3)(c). It does, and the majority opinion says so. That "provision of [Croghan's] agreement executed [on December 3, 2008 and therefore] prior to June 27, 2019, ... violates the requirements of subsection (3)(c)" of KRS 336.700 and, as the revised law requires, "shall be stricken from the agreement...." KRS 336.700(8). The majority opinion appropriately said the provision must be stricken and, on that basis, reversed the summary judgment.
That left for consideration only Norton's arguments that KRS 336.700, as revised, does not apply, and the majority opinion addressed those arguments as well. Finally, Norton argued that this Court should affirm the circuit court on alternate grounds. The majority opinion does not address those alternate grounds and, by implication, rejects them. I concur in that implied holding, too.
However, the opinion unnecessarily addresses the questions answered by the circuit court regarding: (1) whether the employment contract included a knowing and voluntary waiver and reduction of the applicable statute of limitations to six months; (2) whether six months is a reasonable amount of time to assert the claims at issue; and (3) whether the six-month limitation period was tolled during the time that Norton contested Croghan's claim for unemployment benefits. None of these questions is relevant given the retroactive and conclusive applicability of KRS 336.700, as amended.
For these reasons, I concur only with those portions of the majority opinion that focus on KRS 336.700 as controlling the review of this case.