The Court of Appeals Division One holds that the one-year statute of limitations in A.R.S. § 12-541(3) applies to an action to recover a debt created by the breach of an employment contract.

A charter jet company made offers of employment to two pilots. Each pilot signed a substantively identical offer, each with a promissory note and training reimbursement agreement attached as exhibits. The company made each offer contingent upon the completion of specific training, for which the company would advance the cost in the form of a forgivable loan that would be forgiven in its entirety if the pilot remained employed for at least two years. Neither pilot made it to the two-year mark before leaving the company, which waited more than one year to file a contract claim against either pilot.

The superior court dismissed the company’s claims after finding that the company’s claims were time-barred by A.R.S. § 12-541(3), which imposes a one-year statute of limitations to claims arising out of employment contracts. The company appealed.

The Court of Appeals affirmed. The Court first found that the offer and attached promissory note and training reimbursement agreement together constituted a singular employment contract. Although the mere attachment of the note and agreement alone did not constitute an intent to incorporate them into the offer, the offer’s reference to the attachments as setting for “terms and conditions” of the pilots’ employment did. The Court in turn held that A.R.S. § 12-541(3)’s one-year statute of limitations applied to the company’s claim. The offer, along with its attachments, set for the terms and conditions of employment, including the agreement to finance each pilot’s training with a forgivable loan. The debt created by the note was not a separate “non-employment issue” that could be severed from the offer’s terms and conditions and subjected to the longer statutes of limitations in A.R.S. §§ 12-548(A)(1) (actions for debt on written contract) and 47-3118(A) (actions to enforce a promissory note). It was a part of the pilots’ proposed compensation in the company’s offer and, thus, subject to the one-year statute.

Judge Campbell authored the opinion; Judges Furuya and McMurdie joined.

Posted by: Matthew Stanford