Employer Failed to Prove Validity of Agreement to Arbitrate

Takeaway: When an employee denied electronically signing an arbitration agreement, and her employer failed to convincingly show that the signature was that of the employee, a trial court correctly refused to order arbitration of the employee’s sexual harassment claims.

Although an employer claimed that an employee electronically signed an arbitration agreement during the onboarding process on her first day of employment, the employee asserted that she never signed such an agreement, and the employer failed to meet its burden to show that the employee’s signature was authentic. Therefore, a trial court correctly refused to order arbitration of the employee’s sexual harassment and related claims against the employer, a California appeals court ruled.

On the employee’s first day of work with the employer, she completed onboarding paperwork using a third-party electronic workforce management platform.

Five years after starting work, the employee filed a complaint against the employer, asserting 10 claims related to her allegation that her manager sexually harassed her. The employer petitioned to compel arbitration pursuant to an arbitration agreement it claimed the employee electronically signed during the onboarding process on her first day of employment.

In support of the petition, the employer submitted a declaration by a human resources information systems analyst that stated that during the employee’s onboarding, she created a unique user ID and confidential password and electronically signed the arbitration agreement. The employee’s assent was evidenced by an electronic signature block with her name, as well as her name separately typed on the arbitration agreement.

The declaration attached the arbitration agreement, which stated in part that the employer and the employee consented to the resolution by arbitration of all claims related to the employee’s employment.

A typed signature appeared at the end of the agreement with the employee’s typed name printed underneath. A signature by an authorized representative for the employer also appeared on the agreement. The agreement contained no internet protocol (IP) address or other data indicating it was executed electronically, nor did it reference using a password to evince an electronic signature.

The employee opposed the petition to compel arbitration, arguing that the employer failed to meet its burden to prove she executed the agreement because the HR employee who submitted the declaration was not present when she completed the onboarding paperwork, and he did not attest to having personal knowledge that she electronically signed the agreement.

She also noted that the purported arbitration agreement lacked indicia of trustworthiness present in other documents she electronically signed during the onboarding process. She submitted five documents she electronically signed, all of which differed from the arbitration agreement in several key respects. First, the employee’s signature on the five documents was the same, using only the employee’s first and last names. It differed from that on the arbitration agreement, which included a middle name and a nickname. Second, all five documents indicated that the employee assented to agreement by inputting her password, while the arbitration agreement contained no such indication. Third, four of the documents contained the same IP address underneath the electronic signatures, while the arbitration agreement did not reflect any IP address.

The employee flatly denied signing the arbitration agreement. In addition, she did not recognize the name of the company representative on the arbitration agreement, did not know who the employee who submitted the declaration was, and stated that no one was present when she electronically signed the new hire documents.

The trial court found that the employer had met its initial burden to show an agreement to arbitrate by providing the agreement, but that the employee’s denial of signing the agreement shifted the burden back to the employer to prove that her electronic signature was authentic. It further found the employer failed to meet this burden, as the declaration it submitted did not present sufficient details of the onboarding process to establish how the HR employee who submitted the declaration knew the employee must have signed the agreement, and the agreement did not have the appearance of an electronically signed document created in the software platform used by the employer. The court denied the petition to compel arbitration, and the employer appealed.

The appellate court affirmed the trial court’s decision. It concluded that the trial court did not err in concluding that no agreement to arbitrate existed.

The court noted that a party opposing arbitration by challenging the authenticity of their signature need not prove that the signature is not authentic but must submit sufficient evidence to create a factual dispute and shift the burden back to the arbitration proponent. The employee did that here, the court said. While the employee’s denial was adequate, she also provided additional evidence comparing the arbitration agreement to the other documents she signed on that same day and in that same manner—documents that bore indicia of reliability not evidenced by the arbitration agreement.

The employer failed to meet its burden of proving the authenticity of the signature on the arbitration agreement. The evidence it provided—which rested entirely on the declaration—did not show that only the employee could have placed the electronic signature on the arbitration agreement. The declaration summarily concluded that the employee electronically signed and acknowledged the agreement before exiting out of the computer platform, with the only evidence being her name on the agreement.

This was insufficient to meet the authentication requirements. The declaration did not detail the security precautions regarding the use of the employee’s username and password; the arbitration agreement lacked a date, time, or IP address; and the agreement contained no indication it was created within the onboarding system. The appeals court also took into consideration and credited the employee’s statements disputing the reliability of the evidence, given the differences between the arbitration agreement and other documents she signed the same day.

Garcia v. Stoneledge Furniture LLC, Calif. Ct. App., No. A166785 (May 17, 2024).

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