The Enforceability of Employees’ Electronic Signatures Is the Next Battleground for Arbitration Agreements With Class Action Waivers

Here’s a question you likely have never considered: Are hackers overseas infiltrating employers’ computer systems just to sign arbitration agreements with class action waivers for random employees?

While there is no evidence that this has ever happened anywhere, and no logical reason why it would, plaintiffs’ lawyers and even some courts seem to believe this could happen. And that is at the heart of the latest battleground over arbitration agreements with class actions waivers.

Since the United States Supreme Court’s decision in Epic Systems v. Lewis, more and more employers have implemented arbitration agreements with class and collective action waivers. 

Those agreements have worked time and again to require courts to dismiss class or collective actions brought by plaintiffs who have signed such agreements. (The agreements are not as effective as to Private Attorneys General Act (“PAGA”) actions in California, which is a different subject for another day. Adolph)

While a well-written arbitration agreement with a class and collective action waiver should be enforceable so long as interstate commerce is involved, thus triggering the Federal Arbitration Act (“FAA”) and Epic Systems, employers in California have learned that there is a new battleground in enforcing these agreements – whether the employee signed the agreement in the first place.

That issue may give employees a way of escaping their arbitration agreements – and give those judges who don’t like the way employers use arbitration agreements a way to avoid enforcing them.

At the crux of this dispute is technology.  Or, more specifically, electronic signatures.

Back in the good old days, employees signed pre-hire documents by hand, including arbitration agreements and restrictive covenants.  If an employer wanted to enforce an arbitration agreement or a restrictive covenant, it attached a copy of the hand-signed agreement to an affidavit or a declaration.  Except in rare circumstances where employees claimed those signatures were forged or traced, there typically was no dispute about whether employees had actually signed the agreements. The battle was over whether the agreement was enforceable.

That is not the case with electronic signatures, which more and more employers use with their pre-hire documents, including arbitration agreements. 

Electronic signatures are easier to obtain, particularly with remote workers. 

Electronic signatures are easier to store, particularly as employers move to paperless workplaces.

And electronic signatures are more difficult to establish and, therefore, to enforce.

Technically, electronic signatures are to be given the same weight as “wet” signatures. 

But how does an employer establish that the electronic signature on an agreement was actually entered by the employee against who it is trying to enforce the agreement?

As employers in California know, when faced with motions to enforce arbitration agreements and to strike class claims, employees (and their counsel) are regularly asserting that they do not recall signing their arbitration agreements or that they never did so.  Once that happens, the employer then has to convince the court that the employee in fact signed it – and that the electronic signature was not the act of someone else.

Generally, an employer need only establish by a “preponderance of the evidence” – that is, that it is more likely than not – that the employee was the one who electronically signed the arbitration agreement.  Practically, however, some courts are holding employers to a much higher standard, essentially asking the employer to prove that it was not possible for anyone else in the world to have accessed the arbitration agreement and signed it on behalf of the employee.

Putting aside the peculiar world envisioned by these courts where overseas hackers would be interested in hacking into computer systems to sign arbitration agreements on behalf of random employees, it is difficult to conceive how an employer could possibly meet that standard short of obtaining declarations from every person in the world.

That said, knowing that employees’ electronic signatures on arbitration agreements may well be tested, employers would be wise to put systems in place to bolster their arguments that a particular employee – and only that particular employee – could have electronically signed the agreement.  These would include the following:

• Asking the employee to confirm that his or her personal email address is not a shared email address before sending a link to pre-hire documents to the employee’s personal email address
• Sending a link to the employee’s personal email address to access pre-hire documents
• Allowing the employee to establish his or her own unique username
• Allowing the employee to establish his or her own unique password
• Ensuring that no one else in the company has access to the employee’s link, username or password
• Ensuring that no company employee sits with an employee while he or he is completing pre-hire documents online, and not allowing company employees to complete those online documents for the employee
• Tracking the URL of the computer being used to access and complete the documents
• Having the employee complete a form confirming his or her agreement to use an electronic signature
• Tracking the date and time each document is electronically signed
• Sending the employee a confirming email identifying the documents he or she signed 

Even with these security precautions in place, employees may still contend that they did not sign their arbitration agreements. 

And when that occurs, employers should ask the courts to conduct an evidentiary hearing to assess the employee’s credibility, particularly if the employee also electronically signed other documents containing private information that only he or she would know, such as a Social Security number, bank routing information, and contact information for friends and family.