The California Court of Appeal, Fourth District, recently
affirmed an order denying a petition to compel arbitration where the employer
failed to present sufficient evidence that the employee electronically signed
an arbitration agreement. This decision serves as a reminder to employers and
consumer financial services companies that agreements to arbitrate, while now
overwhelmingly accepted as a matter of law, must still satisfy basic contract
formation principles.
In Ruiz v. Moss Bros. Auto Group, Inc., Ernesto Ruiz
filed a putative class action complaint alleging various state law wage and
hour violations by his employer, Moss Bros. The company filed a petition to
compel arbitration of Mr. Ruiz’s individual claims based on an arbitration
agreement it claimed he electronically signed in September 2011. The agreement
provided, in pertinent part, that the arbitrator may "hear only . . .
individual claims" and has no authority to "consolidate the claims of
others into one proceeding." The trial court denied the petition on the
ground that Moss Bros. did not meet its burden of proving the parties had an
agreement to arbitrate the controversy.
On appeal, Moss Bros. offered the declaration of its
business manager, Mary K. Main, who asserted that Mr. Ruiz "electronically
signed" the agreement "on or about September 21, 2011," and that
the same agreement was presented to "all persons who seek or seek to
maintain employment" with Moss Bros. Ms. Main further stated that
"[e]ach employee is required to log into the Company's HR system – each
with his or her unique login ID and password – to review and electronically
execute the Employee Acknowledgement form, which includes the arbitration
agreement."
Mr. Ruiz argued that Ms. Main's conclusory statement was
not enough to prove that he did, in fact, electronically sign the 2011
agreement. Mr. Ruiz also insisted that he did not recall signing the agreement,
and if he had been presented with an agreement that limited his ability to sue
Moss Bros., he would not have signed it.
The appeals court affirmed the trial court, concluding
that Moss Bros. did not present sufficient evidence to support a finding that
Mr. Ruiz electronically signed the 2011 agreement. The court noted that, while
an electronic signature has the same legal effect as a handwritten signature
under California law, any writing must still be authenticated before the
writing, or secondary evidence of its content, may be received in evidence.
The court found that Ms. Main never explained how Mr.
Ruiz's printed electronic signature, or the date and time printed next to it,
came to appear on the agreement. In particular, the court stressed that Ms.
Main failed to show that Mr. Ruiz made the electronic signature because she did
not explain that the signature could have been placed on the agreement only by
a person using Mr. Ruiz's unique login ID and password, and that all Moss Bros.
employees were required to use their unique login ID and password when they
logged into the system and signed electronic forms and agreements.
This decision demonstrates that, even though nearly all
jurisdictions recognize the legal effect of electronic signatures, employers
must be able to establish that the electronic signature was the act of the
employee. An employer should therefore periodically review the procedure it
uses to obtain electronic signatures to ensure that it will be able to
authenticate the signature if necessary at a later time, including for future
use in litigation. Such procedures should also be followed by consumer
financial services companies that require electronic signatures to implement
arbitration agreements with their customers.
Ballard Spahr's Labor and Employment Group routinely
assists employers in drafting, reviewing, and defending the enforceability of
employment and arbitration agreements. The firm's Consumer Financial Services
Group pioneered the use of pre-dispute arbitration provisions in consumer
financial services agreements.
If you have any questions about arbitration agreements or
electronic signatures, please contact John P. McLaughlin at 215.864.8241 or
mclaughlinj@ballardspahr.com, Alan S. Kaplinsky at 215.864.8544 or
kaplinsky@ballardspahr.com, Mark J. Levin at 215.864.8235 or
levinmj@ballardspahr.com, John R. Carrigan, Jr., at 424.204.4338 or
carriganj@ballardspahr.com, Steven D. Millman at 856.761.3421 or
millmans@ballardspahr.com, or the Ballard Spahr attorney with whom you work.
Source: Ballard Spahr's Labor and Employment Group
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