Rayford v American House Roseville I, LLC (Mich, 2025)
A New Era of “Reasonableness” & Adhesion Scrutiny in Michigan Employment Contracts

1. Introduction

The Michigan Supreme Court’s 2025 decision in Rayford v American House Roseville I, LLC (“Rayford”) radically reshapes the enforceability landscape of contractual limitation clauses contained in employment paperwork. By reviving Camelot Excavating’s “reasonableness” test, overruling key Court of Appeals authority (Clark & Timko), and limiting the once-dominant precedent of Rory v Continental Insurance Co to insurance-contract cases only, the Court re-imposes close judicial scrutiny whenever:

• an employment agreement is found to be an adhesion contract; and
• that agreement shortens a statutory limitations period.

The judgment sends a clear message: employers may still bargain for shorter filing deadlines, but such provisions will survive only if fact-specific evidence shows they are objectively reasonable and not unconscionable.

2. Case Background

• Parties: Timika Rayford, a certified nursing assistant and later floor supervisor, versus American House Roseville I, a nursing facility.
• Key Document: An “Employee Handbook Acknowledgement” signed one week after hire, containing a 180-day contractual limitations period for “any claim or lawsuit arising out of employment.”
• Allegations: After reporting alleged sexual favoritism by management, Rayford asserted retaliation, discriminatory harassment, wrongful discharge, malicious prosecution, and abuse of process.
• Procedural Posture: Suit filed almost three years after termination (April 2020). Trial court and Court of Appeals enforced the 180-day clause under Clark and Rory; plaintiff petitioned the Supreme Court.

3. Summary of the Judgment

1. Overruled:
   • Clark v DaimlerChrysler (2005) — which had extended Rory to employment contracts.
   • Timko v Oakwood Custom Coating (2001) — which had treated 180-day clauses as facially reasonable.
2. Limited: Rory (2005) now confined to insurance policy disputes; its broad dicta on adhesion contracts is non-binding for employment settings.
3. Restored: The Camelot / Herweyer framework — requiring courts to test any shortened limitations period in an employee adhesion contract for objective reasonableness.
4. Reasonableness Test (Camelot factors):
   1. Did the claimant have sufficient opportunity to investigate and file?
   2. Is the time so short it practically abrogates the right?
   3. Might the claim be barred before loss is ascertainable?
5. Unconscionability Clarified:
   • Procedural: focuses on actual bargaining power; employee need not prove no alternative jobs, only lack of meaningful choice.
   • Substantive: provision must “shock the conscience” in inequity.
6. Outcome: Trial and appellate decisions reversed; case remanded for discovery and full evidentiary development to decide (a) whether the contract was procedurally & substantively unconscionable and/or (b) whether 180 days is reasonable under the specific facts. If unreasonable or unconscionable, the default three-year statute (MCL 600.5805(2)) governs.

4. Analysis

4.1 Precedents Cited & Their Roles

4.2 The Court’s Legal Reasoning

1. Dicta vs. Holding: The Court labels Rory’s broader statements on contracts outside insurance “nonbinding dicta,” because those subjects were neither briefed nor essential to outcome.
2. Different Context, Different Safeguards: Insurance contracts are pre-approved by the Insurance Commissioner, providing external protection; employment contracts lack such statutory oversight, enhancing vulnerability of workers.
3. Adhesion & Power Imbalance: The Court leans on Black’s Law Dictionary: where employee must “take or leave” a boilerplate contract drafted solely by employer, adhesive dynamics warrant judicial intervention.
4. Public-Policy Undercurrents: Michigan’s Constitution and ELCRA reflect strong policy favoring access to civil-rights remedies; severely curtailed filing windows materially frustrate that purpose.
5. Stare Decisis: Majority views Camelot/Herweyer as historically consistent; sees Rory & progeny as aberrations; therefore re-aligns precedent.

4.3 Impact of the Decision

• Short-Term: Employers across Michigan must reassess offer-packet disclaimers, handbook acknowledgements, and arbitration agreements that shorten limitation periods.
• Litigation Strategy: Defendants can no longer rely on bare signatures; they will need evidentiary support showing employees had real time and capacity to file within shortened periods.
• Future Clauses: Six-month windows are not automatically void, but enforceability will depend on factual context (eg, internal complaint steps, ability to discover harm, employee sophistication).
• Unconscionability Doctrine: Trial courts must analyze both procedure & substance—mere existence of other jobs for plaintiff no longer defeats procedural prong.
• Beyond Limitations: Though the holding focuses on limitations periods, the Court’s revival of “close judicial scrutiny” for adhesive employment contracts may embolden challenges to waivers of jury trial, damages caps, class-action waivers, and mandatory arbitration.
• Commercial Certainty: Businesses may push for legislative clarification; insurers and non-employment commercial actors still retain protection under Rory.
• Comparative Influence: Brings Michigan closer to New Jersey’s stance (Rodriguez v Raymours Furniture, 2016) that civil-rights limitations cannot be contractually abridged absent statutory authorization.

5. Complex Concepts Simplified

Adhesion Contract

A pre-printed, one-sided document drafted by a stronger party (usually a company) where the weaker party must accept or forgo the deal. Example: signing a job application or click-through terms without negotiation.

Contractual Limitation Period

The parties’ private agreement to shorten (or occasionally lengthen) the time allowed by statute to sue. Courts once freely enforced these; Rayford demands a fairness check in employment.

Reasonableness Test (Camelot Factors)

1. Opportunity – Did employee have enough time to discover, investigate, and file?
2. Practical Abrogation – Is the window so short it guts the right entirely?
3. Accrual Timing – Might the claim expire before damages even surface?

Unconscionability

• Procedural: Looks at how the contract was formed. Was there real choice? Was it hidden in fine print? Pressure tactics?
• Substantive: Looks at outcome fairness. Does the term create shockingly lopsided results?

6. Conclusion

Rayford v American House marks a watershed: Michigan re-embraces a protective stance toward employees faced with boilerplate contracts that slice statutory filing periods. The ruling restores a fact-intensive reasonableness inquiry, signals that “adhesion” once again matters, and refines unconscionability doctrine. Employers retain flexibility, but only where shortened deadlines truly leave employees a realistic path to court. For lawyers, HR departments, and judges, the decision demands meticulous review of contractual limitation clauses and renewed emphasis on evidentiary records when asking courts to enforce them.