Seriously? The Second Circuit Makes Life More Difficult For Employers Who Use Electronic Signatures For Agreements With Their Employees

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[co-author: Tayte Doddy]*

Seyfarth Synopsis: Even before the pandemic made in-person work in many industries a thing of the past many employers had stopped requiring that their employees execute employee agreements like non-competition and arbitration agreements with a “wet signature”. Instead, those kind of agreements frequently are acknowledged by the employee electronically. Although the increase in remote work arrangements also increased the elimination of the “wet signature” practice, many employers with employees who work in the workplace use the electronic acknowledgement practice as well. The Second Circuit, however, recently made it more challenging for employers to compel arbitration in that context when the employee says What? That’s not my signature!

Savannah Barrows started working for a Chili’s chain restaurant in Liverpool, New York in March 2015. Three months into her employment, the Chili’s location was acquired by Brinker Restaurant Company. Barrows worked at that Chili’s location until January 2019, when her employment ended just shy of her fourth year anniversary.

After her employment ended, Barrows sued Brinker for various employment law violations Brinker asked the court to dismiss the claims and compel Barrows to submit to arbitration, pursuant to an electronically signed agreement by Barrows to arbitrate all claims.

Various managers who worked with Barrows provided testimony that all employees were required to electronically sign the arbitration agreements. Surprisingly, the employer’s testimony was contradicted by their own evidence, when Brinker later produced a physical copy of the arbitration agreement with a “wet” signature of a second named plaintiff in the case.

Despite Brinker having Barrows’ electronic signature on the arbitration agreement, Barrows responded to the motion with a sworn declaration in which she denied ever signing the agreement and that she had no knowledge of any electronic document system. She claimed that the only documents she ever signed were paperwork documents in her initial hiring, and that she never was presented with any new paperwork or electronic documentation after the Chili’s was acquired by Brinker.

The district court granted Brinker’s motion to compel arbitration on the grounds that Barrows did not present any evidence to create a dispute of material fact. On appeal, the Second Circuit reversed the holding, on the grounds that the district court completely ignored Barrows’ sworn declaration in which she denied having any knowledge of the agreement or signing any documents electronically. In prior Second Circuit cases, personal testimony and declarations have been allowed as evidence to create issues of fact and to defeat motions of summary judgment, so Barrows’ declaration here would be sufficient to create a material issue of fact The Second Circuit vacated the judgment and remanded the case back to the lower court to resolve the question of whether arbitration should be compelled taking into account Barrows’ declaration this time .

Lessons learned from this case:

UNIFORMITY

Not having uniform onboarding practices hurt Brinker here. The Second Circuit honed in on the issue that the second named plaintiff in the case had a physical, “wet” signature on his arbitration agreement, which ultimately brought uncertainty to Brinker’s method of gathering signatures from employees. If the second named plaintiff had an electronic signature like Barrows instead of a wet signature, Barrows’ argument would not likely have appeared credible to the court. But, because Brinker was not uniform in their process of collecting signatures, the discrepancy cast doubt on the authenticity of Barrows’ electronic signature, all the while making Barrows’ declaration that she did not sign more credible and plausible.

The holding in Barrows places an increased burden of uniformity and organization on employers when collecting signatures from their employees. Thus, employers should ensure that they are implementing uniform processes when handling employee documentation. Whether it be all documents are signed on paper, or all documents are signed electronically online, having one uniform process lowers the risk of the employer appearing to be disorganized and/or potentially mishandling employee documents. The Second Circuit discussed in the opinion that only personal testimony that blatantly contradicts the record or of which is grossly implausible to a reasonable person will fail to create genuine issues of fact, so employers can protect themselves up front by being organized and uniform in their onboarding processes to eliminate any doubt on their end.

TWO FACTORS

The court also considered the possibility that Barrows’ signature was forged by Chili’s management, because the employee onboarding accounts passwords were generated by a mix of information the management had direct access to (birth date, social security number, etc.) Because the managers are in control of the online onboarding software and can access employee accounts, the possibility that the employer could falsify a signature must be considered.

Employers may find two factor verification, the process of requiring confirmation from two separate sources, to be helpful in providing indisputable evidence of signatures in the future. For example, an employer could require employees who provide an electronic signature to confirm their signature through a separate verification email, as a second account of the employee signing the document. Clicking a verification link on an email is quick, provides the employer with a second confirmation of the signature, and eliminates speculation that the employer might have tampered with or forged an employee’s signature for them. If an employee has the added task of signing into their personal email account to verify that they signed a document, that in itself is good evidence that the employee in fact knew and agreed to what they were signing even though it was an electronic signature. This could protect employers against denials and declarations of employees in the future at a low cost.

*Summer Fellow

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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