California Courts of Appeal rules on handwritten vs electronic signature on arbitration agreement

California Courts of Appeal rules on handwritten vs electronic signature on Arbitration Agreement

Employee cannot get away by saying he 'does not recall' giving consent

Recently, the California Courts of Appeal compelled three former Wise Auto Group employees to arbitrate their wrongful termination and 24 other employment-related claims against the company. This was because each employee had signed the binding arbitration agreement in their own handwriting.

Many California employers ask incoming and existing employees to agree in advance to arbitrate any employment-related disputes and give up the right to bring such claims in court. Employees are often asked to 'sign' the arbitration agreements electronically, which is administratively easier than having the employee sign it in their handwriting.

Thus, in the Iyere vs Wise Auto Group case, Wise Auto had the initial burden of proving that the employees agreed to arbitrate their claims.

In resisting Wise Auto's motion to compel arbitration, the plaintiff-employees signed sworn declarations that:

(1) They did not recall ever reading or signing the arbitration agreement;

(2) The arbitration agreement was part of a 'large stack of documents' they were rushed to sign on their first day of work;

(3) No one explained the agreement;

(4) They would not have signed the agreement had they known they were giving up their right to file a lawsuit against Wise Auto and that they were free to opt out of the agreement. None of the employees claimed their signatures had been forged.

However, the court of appeal held, "There is no conflict between (the employees) having signed a document on which their handwritten signature appears and, two years later, being unable to recall doing so. In the absence of any evidence that their purported signatures were not their own, there is no evidence that the plaintiffs did not in fact sign the agreement."

The court observed that, by contrast, it could be 'quite daunting' for an employer to prove an employee electronically signed an arbitration agreement. An employee may avoid arbitration by saying he or she does not recall affixing an electronic signature.

It added, "An individual cannot affirm or disavow an electronic signature from the face of a computer printout, but an individual normally can recognize or disavow a handwritten signature that purports to be his or her own."

Stating that the employees could not avoid arbitration by claiming they did not read the agreement before signing it, the court ruled, "Failing to read an agreement before signing it does not prevent the formation of a contract."

The court rejected the claims of the plaintiffs that the substance of the arbitration agreement was unconscionable. It ruled that Wise Auto's right in the arbitration agreement to choose which of two 'well recognized and respected alternative resolution firms' would hear the former employees' claims against the company did not make the agreement one-sided. Also, there was no evidence that the arbitrators in one of the firms tended to rule in favour of the employers.

This served as a lesson that the employers should designate in their arbitration agreement one or more established alternative dispute resolution providers to arbitrate employment disputes.

The Courts of Appeal also noted that the employees could have refused to sign the arbitration agreement. The agreement specifically mentioned the employees could decline to sign the arbitration agreement and still become or remain Wise Auto employees.

Until the courts finally resolve whether California's statute banning the mandatory pre-dispute employment arbitration agreements (AB 51) was valid, employers should consider giving employees the express right to opt out without consequence.

An arbitration agreement may eliminate an employer's risk of a runaway jury verdict on employment-related claims only if an employer could show the employee actually signed the agreement and could defeat his contentions that the agreement was procedurally and substantively unfair.

While getting an employee's handwritten signature on the arbitration agreement would help meet the first challenge; drafting a balanced agreement would help meet the second issue.