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More time to sue, but not to arbitrate

A pair of recent rulings of the Minnesota Court of Appeals gives employees more time for asserting certain claims, but less time to pursue others. 

The two end-of-the-year rulings both reverse prior decisions.  In one, the court enlarged the time period for bringing whistleblower claims from two years to six years; and in the other, it overturned a $10 million arbitration award because the claim was not brought within the time period prescribed in the employee’s employment contract.

Here’s a look at the cases and how they may affect employers and employees in connection with workplace-related claims.

Whistleblower wins

Whistleblowers, employees asserting that they were wrongfully terminated in retaliation by their employers, have traditionally been subject to a two year statute of limitation in Minnesota.  Their claims, however, were elongated by a ruling of the appellate court in Ford v. Minneapolis Public Schools, 2014 WL 7011068 (Minn. App. Dec. 15, 2014) (unpublished).  The case involved a Minneapolis school teacher who was terminated for voicing concerns about maltreatment in the workplace, which occurred more than two years before her suit began.  The case was thrown out by the Hennepin County District Court and affirmed by the Court of Appeals.

Earlier this year, the Minnesota Supreme Court sent the case back to the appellate court for re-examination, based upon a ruling by the High Court that gives employees six years to sue under rights created by statute, rather than most employment claims, which are subject to a two-year statute of limitations.  Because the whistleblower law, Minn. Stat. § 181.932, was created by legislative action, it is subject to the appellate court, on reviewing the case again, deemed the six year statute of limitations to apply.

As a result, the teacher will have her day in court to try to convince the judge and jury that her whistleblower claims have merit. 

Arbitration Appeal 

But employees may have less time to pursue claims that arise under arbitration agreements.  In Davies v. Waterstone Capital Mgmt., L.P., 856 N.W.2d 711 (Minn. Ct. App. 2014), the appellate court dismissed a large award for hedge fund managers who claimed wrongful termination. 

The employee initially brought a case in District Court, which was dismissed because his employment contract contained an arbitration clause.  He then began an arbitration, which resulted in an award of $9 million, plus an additional $1 million in attorney’s fees.  However, the case was brought back to district court, which affirmed the decision.

However, the Minnesota Court of Appeals disagreed.  It ruled that the case was untimely because the arbitration clause contained a 90-day limitation period and the arbitration was not commenced within that 90 day period.  The Court held that it was “not unreasonable” to enforce the 90 day clause, which required the arbitration agreement, even though the employee’s underlying claims for wrongful termination and defamation would have ordinarily invoked a longer two year statute of limitations period had they been pursued outside of arbitration.

The case may be headed to the Minnesota Supreme Court for final resolution.  But, unless it is overturned, neither the employee nor his attorneys will be able to collect and cash in on their victory in the arbitration proceeding.

Tips & Traps

These cases offer a few trips and contain a few traps for employees and employers, alike. 

  • Employees should be vigilant to determine what particular statute of limitation might apply to their claims.  Arbitration clauses can provide greater restrictions than other types of claims.
  • Employers may wish to include a shorter limitation period in arbitration agreements, although employees may resist those clauses and try to negotiate for longer periods of time to pursue claims.
  • Employers should be prepared to raise limitation periods as defenses in the event of litigation and any claims are brought against them.
  • The existence of longer limitations for whistleblower claims may increase the leverage of employees in settling those claims.  Conversely, shorter limitation periods contained in some arbitration clauses may impair settlement by employees. 

These considerations, and many others, should be taken into account by employees and employers in connection with the pursuit of workplace-related claims.