Over the last decade, the use of e-signatures has become the norm for human resources departments when onboarding new employees. The advent of resources like DocuSign, Taleo, BabooHR, and others have made this process simple, efficient, and very user friendly. But with these technological advances comes increased scrutiny from California courts – particularly when evaluating electronically signed arbitration agreements.
Generally, for an e-signed arbitration agreement to be enforced, an employer must demonstrate, beyond a “preponderance of evidence”, that the e-signature is the “act of” the employee. This standard has become more difficult to attain over the years. In the seminal 2014 case entitled Ruiz v. Moss Bros. Auto Group, Inc., the court identified certain key characteristics that an employer may use to show that the signature was the “act of” the employee, including: (1) the employee was required to use a unique, private login and password to affix the electronic signature; and (2) evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions – such as date and timestamps, and IP address verification.
Enter the recent opinion in Garcia v. Stoneledge Furniture, LLC which put a fine point on these requirements. In Garcia, an employee was onboarded through the Taleo system. Taleo required her to create a unique login ID and confidential password. In addition, the employee checked a box assenting to the use of the electronic signature block provided. The employee then proceeded to complete a number of onboarding documents including, purportedly, an arbitration agreement. However, unlike the other new hire documents she signed on Taleo, the arbitration agreement did not contain the IP address underneath the electronic signature, and did not contain an indication that the employee used her confidential password to access the document. In addition, unlike the other onboarding documents, the signature block used a different signature.
In support of a Motion to Compel arbitration, the employer presented a declaration from its human resources information systems analyst, in which he averred that the employee was the only person who could have signed the document. Both the trial court and the Court of Appeal disagreed. Both courts found that the declaration of the systems analyst was insufficient because he was “not a percipient witness” to the employee creating the unique ID and/or confidential password and because his declaration lacked sufficient detail regarding the security precautions employed by the company to demonstrate that only that employee could have accessed the arbitration agreement. In contrast, the employee flatly declared that she did not sign the agreement – a statement that shifted the burden to the employer to prove otherwise. The lack of information in the systems analyst’s declaration was insufficient to overcome this burden and the employer’s effort to compel arbitration was denied.
As with so many other decisions related to employment arbitrations in California, Garcia serves as yet another cautionary tale. If onboarding is conducted electronically, employers should have unimpeachable security mechanisms in place to preemptively demonstrate that the signature on the agreement could only have come from that specific employee. Otherwise, it might be best for employers to revert to good old fashioned pen and paper to avoid any issues.
