Employer Failed to Prove Employee E-Signed Arbitration Agreement

Because an employer was unable to prove that the e-signature on an arbitration agreement was in fact made by a former employee, a California appellate court ruled that the agreement could not be enforced and a class-action complaint could proceed.

The former employee, who worked at a Santa Barbara restaurant from February 2016 to June 2017, alleged that the employer did not provide meal periods, rest periods or accurate wage statements and did not pay all wages owed upon termination.

The restaurant argued that the worker was required to arbitrate his claims under an agreement he signed. The restaurant uses an electronic system through which job seekers apply and consent to electronically access, review and sign documents. Candidates create an account with a unique username and password and agree to keep their credentials confidential. The employer cannot reset passwords or access these accounts.

New hires complete their employment documentation on a computer at the restaurant. They log in with their username and password and fill in biographical and tax information. The documents include an arbitration agreement and arbitration rules and procedures.

In this case, a printout showed the employee's e-signature on an arbitration agreement under his username. However, he claimed that the restaurant manager asked him to study the menu while she completed the electronic paperwork for him. He denied e-signing the arbitration agreement or authorizing the manager to apply his e-signature and said no eyewitness saw him press a button to e-sign the agreement.

The restaurant manager said she initiated the employee's online paperwork and received e-mails indicating he completed it. The manager said she did not ask the employee for his username or password and he did not supply them, nor did she access his account, sign documents on his behalf or ask him to study the menu.

The trial court concluded that, while this was a close case and both sides presented plausible scenarios, the employer failed to meet its burden to show that the employee had consented to the agreement. Accordingly, the court denied the restaurant's motion to compel arbitration. The employer appealed.

E-Signature Rules 

Under California law, an e-signature has the same legal effect as a handwritten one. The party seeking to rely on the e-signature, however, has the burden of proving its authenticity. An e-signature is attributable to a person if it was "the act of the person."

The "act of the person" may be shown in any manner. Showing that effective security procedures were in place that would have prevented anyone else from affixing the e-signature would have been very helpful evidence, the appeals court said.

[SHRM members-only HR Q&A: What are the California rules regarding mandatory arbitration agreements, and how do they differ from federal law?]

The trial court had found that the employer had not carried its burden of proving the authenticity of the employee's e-signature. It found that a manager's statement that the employee "signed and acknowledged" the agreement, as shown by an electronically executed copy of it with his name, unique username and the date he signed it, was not enough to prove the authenticity of the signature, in the face of the employee's denial.

The appeals court said its role in reviewing the case was not to reassess witness credibility or reweigh evidence on appeal. Rather, its job was to determine whether the law was correctly applied. Thus, the appeals court affirmed the trial court's order denying the arbitration petition.

Cummings v. Eureka Restaurant Group LLC, Calif. Ct. App., No. B294120 (Jan. 7, 2020).

Professional Pointer: An employer that allows e-signatures on important documents should ensure that the signing procedure is secure and that, if necessary, it can demonstrate the security of the procedure. Steps an employer can take are discussed in Espejo v. Southern California Permanente Medical Group.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.