On December 23, 2014, in Ruiz v. Moss Brothers Auto Group, Inc., 2014 Cal. App. LEXIS 1176 (Cal. App. Ct. 4th Dist. Dec. 23, 2014), the California Appellate Court joined a number of other state and federal courts in holding that employers need to provide strict proof that electronically signed employment arbitration agreements were, in fact, signed by the complaining employee.
Workplace arbitration agreements are becoming increasingly important as risk management tools in defending against class actions. This case is a reminder for employers that, though electronically signed employment arbitration agreements are generally held to be valid, employers need to make sure that they can prove with certainty under the laws of their respective states that their employees are the ones who electronically signed these agreements.
Background Of The Case
The plaintiff, Ernesto Ruiz, filed a putative class action against his employer, Moss Brothers Auto Group, alleging that Moss Brothers failed to pay himself and other employees overtime and to provide required meal and rest breaks. Ruiz sought civil penalties for these violations on behalf of himself, his fellow employees, and the State of California.
Moss Brothers moved to compel arbitration because, according to Moss Brothers, Ruiz had electronically signed an arbitration agreement. That arbitration agreement provided that Ruiz would have to bring any employment dispute before an arbitrator, and further provided that the arbitrator could “hear only . . . individual claims” and had no authority to “consolidate[] the claims of others into one proceeding.”
Ruiz opposed arbitration and submitted a declaration in which he said that he did not recall signing the arbitration agreement and that, moreover, he would not have signed any agreement that would have limited his ability to sue Moss Brothers.
Moss Brothers countered Ruiz’s declaration with a declaration of its own, stating that “Each 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. While all employees are required to sign the form, they are free to review it at their leisure while logged into the HR system.” It also produced a copy of the arbitration agreement at issue in the case with the phrases “Ernesto Zamora Ruiz (Electronic Signature)” and “9/21/2011 11:47:27 AM” under the signature and date lines of the agreement.
The Court’s Ruling
The Court of Appeal upheld the trial court’s finding that Moss Brothers had not proven by a preponderance of the evidence that Ruiz was the one who electronically signed the arbitration agreement. Specifically, the Court of Appeal found that it could not infer that Ruiz signed the arbitration agreement simply because the arbitration agreement was “presented to all Moss Bros. employees . . . and each employee is required to log into the company’s HR system, using his or her unique login ID and password, to review and sign the Employee Acknowledgment form.” It said that, without some additional explanation of how this would prove that it was Ruiz who signed the agreement, there was a “critical gap” that prevented the Court from concluding that Ruiz signed the agreement.
Other courts have made similar rulings. For example, in Kerr v. Dillard Store Servs., 2009 U.S. Dist. LEXIS 11792 (D. Kan. Feb. 17, 2009), an employee who brought a racial discrimination claim against her employer claimed that the arbitration agreement she allegedly signed electronically must have been signed on accident by a secretary who was logged into her computer because she would have refused to sign the agreement. The court refused to enforce the employment arbitration agreement because the employer “did not have adequate procedures to maintain the security of intranet passwords, to restrict authorized access to the screen which permitted electronic execution of the arbitration agreement, to determine whether electronic signatures were genuine or to determine who opened individual emails.” The court went on to find that, as a result, “it is not inconceivable [the secretary] or a supervisor logged on to plaintiff’s account and executed the agreement,” and thus that the employer had not proven by a preponderance of the evidence that the employee had signed the arbitration agreement.
Similarly, in Neuson v. Macy’s Department Stores Inc., 249 P.2d 1054 (Wash. App. 2011), an employer tried to enforce an electronically signed employment arbitration agreement, arguing that the fact that the employee’s social security number, birth date, and zip code were entered on the electronic signature showed that the agreement was signed by the employee. The Washington Appellate Court disagreed because the employer could not show “how or why the information on th[e] electronic signature would be unavailable to anyone other than” the plaintiff.
Implications for Employers
While courts generally find that complaining employees did, in fact, electronically sign employment arbitration agreements, employers should, in light of cases such as Ruiz, Kerr, and Neuson, take steps to make sure that they can prove that electronically signed employment arbitration agreements were signed by each of their employees. The question of whether an arbitration agreement exists is generally a question of state law. See Perry v. Thomas, 482 U.S. 483, 492 n. 9 (1987). Because of this, employers should look to cases in their own state finding that employers proved that their employees had electronically signed employment arbitration agreements and implement the procedures used by the employers in those cases. By doing so, employers can not only greatly reduce the risk of an adverse ruling on whether an arbitration agreement was electronically signed but also the unnecessary expense of litigating that issue.