John Hancock, Meet the Digital Age - Best Practices When Obtaining Employee E-Signatures on Arbitration Agreements

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[co-author: Hannah Waldman]

Traditionally, a signature affixed to a document indicates that the person who “squiggled” on the document understands and agrees to the terms of the document. However, an electronic signature may not be as easy to authenticate. A California Court of Appeal recently held that an electronic signature did not establish an employee’s consent to an arbitration agreement where the employee “presented evidence that she never saw the [arbitration] agreement during the onboarding process and did not affix her electronic signature to it.” (Bannister v. Marinidence OPCO, LLC).

In California, the party seeking to enforce an arbitration agreement must prove the validity of the agreement.  California law provides that “an electronic signature may be attributed to a person if 'it was the act of the person.’”  The “act of the person” may be shown in any manner, “including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Cal. Civ. Code 1633.9).

In Bannister, the employee challenged the validity of the arbitration agreement she purportedly signed by presenting evidence that she had not signed or reviewed the document herself, and testifying that the employer's human resources team had instead signed the agreement electronically for her during the onboarding process.  Although the employee’s social security number, employee identification information, and pin code were required in order for her to sign the arbitration agreement, the employee persuaded the court that the employer also had that information and could have signed the document on her behalf.

The following facts contributed to the Court’s conclusion that the employer could not prove that the electronic signature on the arbitration agreement was the act of the employee: 

  • Twenty or more employees were onboarded on the same day as the employee.
  • The company's HR manager entered the employees’ information into a laptop to expedite processing. No employee-specific usernames or passwords were required to access the onboarding portal, and each employee's Social Security number was available in the employee's personnel file.
  • The HR manager asked the employee for information, including her tax withholdings and emergency contacts, but did not show her what was on the computer and did not provide her with any copies of documents.
  • The employee claimed she never saw the arbitration agreement and never clicked “I agree” or otherwise signed the arbitration agreement during the onboarding process. The employee never operated the HR manager's laptop computer.
  • The employee presented evidence that the HR manager completed the onboarding process for other employees without their participation by continuing to remotely onboard employees without the employees being present.

Based on the foregoing, while employers can still obtain e-signatures, they are advised to incorporate additional safeguards into the onboarding process to ensure that employees will actually be the ones executing and being bound by any arbitration agreements that they sign electronically.

Employers can establish that an e-signature belongs to the employee by following a few simple “do’s” and “don’ts”:

DO

Use individualized PIN numbers and limit third-party access to the documents. If multiple employees in the company can access unsigned documents, it may be difficult to prove that the employee actually signed the agreement. Human resources professionals may have access to employee identification (e.g. social security or employee identification numbers), so requiring employees to input this type of information before signing may not be enough to authenticate employee signatures.  To prevent these issues, consider requiring signatory employees to create a unique username and password (which is not known to other employees) in order to access and sign their records.

DON’T

“Sign” documents for employees. Employees should know the name and nature of each document they sign. California law defines a digital signature as “an electronic identifier, created by computer, intended by the party using it to have the same force and effect as the use of a manual signature.” Regardless of whether employees create their signature with a mouse or type their name, they must do it themselves.

DO

Make sure that employees are able to review arbitration agreements in full before signing them.  Consider requiring electronic initialing on the bottom of each page.

DO

Provide employees with a copy of the arbitration agreement. This will offer employees ample time to read the document. Consider using DocuSign, a service used to electronically sign documents that complies with state and federal law. This company provides customers with a copy of the document, requires them to click a button to confirm signing, and provides other mechanisms to ensure e-signatures may be properly authenticated.[1]

DON’T

Rely solely on the date and location affixed to the signature. This is not enough to prove that the signature was truly the “act of” the employee, as it does nothing to establish that the employee was the only person who could have signed the document. Instead, employers must be able to explain the process through which the date and time was affixed to the document.  Companies should utilize a system that allows them to demonstrate that the employee’s name could have only been placed on the relevant signature pages by someone using the employee’s unique username and password at the date, time, and IP address listed on the documents.

Given the ubiquity of remote work options following the pandemic, it is tempting to skip many of these practices in favor of a more simplified onboarding process. However, complying with these simple guidelines can prevent challenges down the road. 

[1] Newton v. Am. Debt Servs., 854 F. Supp. 2d 712, 731 (N.D. Cal. 2012)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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