An employer failed to prove that an employee electronically signed an arbitration agreement, so the worker could not be forced to arbitrate her workplace claims, a California appeals court ruled.

If an employer is seeking to compel arbitration, a trial court must first determine if an agreement to arbitrate the disagreement exists, the court said. The employer is required to prove that an arbitration agreement exists, and if the employee claims his or her alleged signature is invalid, the employer must prove that the signature is authentic. The employer, in this case, failed to do so, the appeals court said. Therefore, the trial court correctly refused to mandate arbitration.

Background

The employee had worked in the administrative offices at a skilled nursing facility for approximately three decades when the employer bought the facility. A year later, the employer fired the employee, and the employee filed a lawsuit alleging discrimination, retaliation, defamation, and other claims.

The employer filed a motion to compel arbitration, arguing that at the time it took over the facility, the employee electronically signed an arbitration agreement when completing the paperwork required for the employer’s new workers. After the employee presented evidence that she never saw the agreement during the onboarding process and did not affix her electronic signature to it, the trial court denied the motion. The employer appealed.

Electronic Signatures

Under California law, an electronic signature may be attributed to an employee if the security procedures used in the signing guarantee that the signature is indeed that of the employee. For example, an employer may establish that the electronic signature was actually the employee’s by presenting evidence that a unique login and password known only to the employee was required to affix the electronic signature, along with evidence detailing the procedures the employee had to follow to electronically sign the document and the accompanying security precautions, the court said.

In this case, the employer presented evidence that the employee signed the arbitration agreement during her onboarding process. To access the online portal, an employee must enter his or her first and last name and Social Security number, in addition to entering the employer’s client ID and pin code, which are the same for all employees. Once logged in, the employee must complete a W-4 tax withholding form and provide emergency contact information before accessing the arbitration agreement. Based on these requirements, according to the employer, the electronic signature on the arbitration agreement could only have been placed there by the employee.

The employee, however, presented evidence that she did not touch the computer during the onboarding process and never reviewed or signed any arbitration agreement.

When the employer bought the nursing facility, she said, it had a short deadline by which to complete the purchase transaction and take over the facility. As a result, she claimed, the employer had to rush to hire the 180 nursing facility staff members employed by the prior owners before the deadline.

She further said that 20 or more employees were onboarded the same day she was and that the company’s HR manager entered their information into a laptop. 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 HR manager, she said, did not inform her or the other employees about an arbitration agreement. She claimed she never saw the arbitration agreement and never clicked “I agree” or otherwise signed the arbitration agreement during the onboarding process. The process took 10 minutes or less, and the employee never operated the HR manager’s laptop computer.

In addition, the employee presented evidence that the HR manager completed the onboarding process for other employees without their participation. According to the employee, the HR manager continued to onboard employees after she returned to her office in Utah. She did so remotely, without the employees being present.

The appeals court concluded that there was enough evidence to support the trial court’s conclusion that the employer failed to prove that the electronic signature on the arbitration agreement was that of the employee.