To help meet the fast-paced demands of their global and mobile workforces, many employers have reconfigured their onboarding processes and HR system intranets to electronically disseminate company policies and agreements and collect employees’ electronic signatures. An important question to consider when using these processes is: “How will we prove that the employee received and signed the electronic instrument at issue?” As one recent California Court of Appeal decision highlights, taking the time to learn that answer -- and explain it to the court -- can be everything. In Ruiz v. Moss Bros. Auto Group, Inc., No. E057529, 2014 WL 7335221 (Cal. Ct. App. Dec. 23, 2014), the employer’s failure to do so cost it any chance it had to enforce an arbitration agreement with a class action waiver, forcing it instead to have to defend a putative wage and hour class action in court.

While Ruiz involved the application of California state law, the rules of federal evidence implicate similar principles. The opinion therefore is a timely reminder to employers within and outside of California using intranets and other processes designed to collect electronic signatures.

How To Avoid “Evidentiary Gaps” When Attempting To Authenticate An Electronic Signature

The Ruiz opinion provides some useful insights into the factual detail that employers must offer to prove that an electronic signature is authentic, as discussed in the case summary below:

  • Plaintiff Ruiz filed a putative class action complaint against his employer, Moss Bros. Auto Group, Inc. (Moss Bros.). The complaint also alleged representative claims for civil penalties on behalf of Ruiz, other employees, and the state, under California’s Private Attorneys General Act of 2004 (PAGA).
  • Moss Bros. petitioned for an order compelling arbitration of Ruiz’s individual claims based on a two-page arbitration agreement that contained a waiver of class and collective claims, and that it claimed Ruiz had electronically signed in September 2011. 1
  • As the party seeking arbitration, Moss Bros. had the burden of proving the existence of an arbitration agreement. Ruiz, however, contended he had no recollection of ever signing such an agreement. Ruiz did not deny that the electronic signature on the arbitration agreement was his, but claimed he did not recall signing the 2011 agreement, and would not have signed it had it been presented to him.
  • In the face of Ruiz’s failure to recall signing the arbitration agreement, it was up to the employer to prove by a preponderance of the evidence that the electronic signature was authentic. 2 To meet this burden, Moss Bros. had to prove that the electronic signature was, in fact, “the act of” Ruiz. 3 x Moss Bros. failed to meet its burden, a finding affirmed on appeal.

Here is what went wrong:

  • Moss Bros. presented evidence through two declarations of its business manager who was “required to be familiar with the generation and maintenance” of employee personnel records. 4
  • In her first declaration, the business manager summarily asserted that Ruiz electronically signed the twopage arbitration 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. 5 The business manager did not explain, however, how Moss Bros. verified that Ruiz, or other Moss Bros. employees, electronically signed the 2011 arbitration agreement:

To be sure, “Ernesto Zamora Ruiz (Electronic Signature)” and “9/21/2011 11:47 AM” appear in print on signature and date lines of the 2011 agreement, and [the business manager] apparently retrieved the proffered “true and correct copy” of the 2011 agreement from Moss Bros.’s personnel records. But [she] never explained how Ruiz’s printed electronic signature, or the date and time printed next to the signature, came to be placed on the 2011 agreement. More specifically, [she] did not explain how she ascertained that the electronic signature on the 2011 agreement was “the act of” Ruiz. 6

  • In her second declaration, the business manager explained that an Employee Acknowledgement form, including the 2011 arbitration agreement Ruiz electronically signed, was presented to all Moss Bros. employees as part of a series of changes to the company’s employee handbook. She elaborated:

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. 7

  • Yet, the business manager still did not indicate whether, or if so how, Moss Bros. ascertained that Ruiz electronically signed, or was the person who electronically signed the Employee Acknowledgement form, including the 2011 arbitration agreement. The declaration did not explain how, or upon what basis, it could be inferred that the electronic signature on the 2011 arbitration agreement was “the act of” Ruiz. “This left a critical gap in the evidence supporting the petition.” 8

As the Ruiz court observed, the burden of authenticating an electronic signature is not great. Given Ruiz's failure to recall electronically signing the arbitration agreement, however, the fact the agreement had an electronic signature on it in the name of Ruiz, and a date and time stamp for the signature, was not sufficient to support a finding that the electronic signature was, in fact, “the act of” Ruiz. The Court of Appeal suggested some specific facts that the employer could have -  well, should have -- presented:

  • “[The business manager] did not explain that an electronic signature in the name of “Ernesto Zamora Ruiz” could only have been placed on the 2011 agreement (i.e., on the Employee Acknowledgement form) by a person using Ruiz's “unique login ID and password”;
  • that the date and time printed next to the electronic signature indicated the date and time the electronic signature was made;
  • that all Moss Bros. employees were required to use their unique login ID and password when they logged into the HR system and signed electronic forms and agreements;
  • and the electronic signature on the 2011 agreement was, therefore, apparently made by Ruiz on September 21, 2011, at 11:47 a.m.” 9

Courts in other cases have rejected challenges to the authenticity of the employee’s electronic signature when presented with similar facts, as described below.

Langston v. 20/20 Companies, Inc., No. EDCV 14–1360 JGB (SPx), 2014 WL 5335734 (C.D. Cal. Oct. 17, 2014) -- Order granting the former employer’s motion to compel arbitration where each named plaintiff sales representative  was proven to have electronically signed a mutual arbitration agreement at the time of hire.

  • The employer submitted a declaration by its Human Resources Associate Supervisor who “attest[ed] to her familiarity with the onboarding process for new sales representatives, including monitoring their completion and acknowledgment of online forms, as well as with the electronic records which document a sales representative's completion of the onboarding process.” 10
  • The declarant then explained how the named plaintiffs, as new sales representatives, were required to electronically sign the arbitration agreement: “First, the prospective sales representative provides an email address to [the defendant company], which then emails to the sales representative a link to the online portal as well as a username and temporary password. Upon logging in to the portal, the sales representative creates a new password, which he or she must use to access the online forms, including the [arbitration agreement]…. [A]fter accessing the online portal, the sales representative completes various forms until reaching the [arbitration agreement]. The sales representative must then type his or her name in an empty text box next to the words Employee Signature. The sales representative cannot progress to the remaining forms without typing his or her name onto the form…. [T]he portal then generates a copy of the electronically signed form, which the sales representative may save, and which is archived for [the company’s] later use; [the company] has continuous access to the forms. The online portal automatically populates the date onto the form and records the date on a separate list.” The declarant provided “true hard copies” of the arbitration agreements executed by the named plaintiffs, which she attested to having retrieved from the online onboarding portal. 11
  • Given this evidence, the court had no difficulty rejecting plaintiffs’ contention that the employer had failed to properly authenticate their electronic signatures on their respective arbitration agreements. 12

Jones-Mixon v. Bloomingdale's, Inc., No. 14–cv–01103–JCS, 2014 WL 2736020 (N.D. Cal. June 11, 2014) -- Order granting the former employer’s motion to compel arbitration and dismiss where plaintiff electronically signed a new hire arbitration agreement and did not subsequently elect to trigger the 30-day opt out provision.

  • The employer submitted a declaration by the Director of Employee Relations for its “Solutions InSTORE” dispute resolution program attaching the relevant documents that evidenced the arbitration agreement and electronically signed “Acknowledgment Form.” The declaration indicated that the Director served as “custodian” for all the records comprising the Solutions InSTORE program and had “personally reviewed” plaintiff's records to determine whether plaintiff had returned an Election Form to opt out of arbitration.
  • The declaration explained that to electronically sign the Acknowledgment Form, employees during new hire orientation “must log in to an employee website using the employee's Social Security number, date of birth and zip code. Once logged in, the employee sees a screen list of the forms the employee must complete for employment. Included in this list is the Acknowledgment Form. To view the Acknowledgment form, an employee must click the Fill in Form link next to the Solutions InSTORE New Hire Acknowledgment place on the list. The next screen the employee sees is the Acknowledgment Form. The employee can then click on the ‘I Certify’ link at the bottom of the Acknowledgement Form, which prompts a dialogue box requesting the employee to electronically sign. To electronically sign, the employee must again enter his or her Social Security number, date of birth and zip code.” 13
  • Based on this evidentiary showing, the court rejected plaintiff’s contentions that there was no authentic and admissible arbitration agreement and that she never consented to an agreement to arbitrate by simply not submitting an opt out form. "Defendants have presented evidence that to sign the [agreement], Plaintiff was required to twice enter her Social Security number, birth date and zip code, and would not have been able to electronically sign if the information was not matched correctly. The Court thus finds that Plaintiff's electronic signature on the Acknowledgment Form is valid.” 14

Do Not Let Your Electronic Personnel Systems Work Against You: Know How Your Employees’ Electronic Signatures Are Uniquely Formed

The Ruiz opinion highlights the need for employers to understand their online personnel systems so they can properly authenticate employees’ electronic signatures. Employers should be prepared to explain, step by step, how the unique electronic signature came to be placed on the agreement or form -- i.e., how the electronic signature is “the act of” the individual employee. HR, IT, and other appropriate personnel should be well-versed on how electronic signatures are made and know to ask the right questions when considering adopting systems that record electronic signatures.

Employers looking to be proactive also should consider doing some or all of the following:

  • Identify the different agreements, policies, and forms that applicants, new hires and other employees are required to electronically receive and sign. Priority focus should be on the instruments that the company will most likely rely on in future litigation. Arbitration agreements, employment applications, background check authorization forms, and policy/handbook acknowledgements made accessible for electronic signature via online portals during onboarding (and/or periodically throughout employment) are a few common examples.
  • For each such instrument, learn the answer to this question: “Have we collected -- or can we now collect -- the facts that we will need to be able to prove, step by step, the authenticity of the employee’s electronic signature?”
  • Document and maintain records of the facts learned so that if persons with critical knowledge leave the company, their knowledge stays behind.