A recent California Court of Appeal decision provides important guidance for California employers who allow or require employees to execute arbitration agreements and other employment-related documents using electronic signatures.  In a time where employers are increasingly relying on technology to complete the onboarding process of new employees, this recent opinion touches directly on the validity and verification of digital signatures for not only arbitration agreements but also for various other forms and agreements new employees execute during their employment.

In Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, Maureen Bannister (“Bannister”) filed a wrongful termination action against her former employer, Marinidence. In response, the employer filed a petition to compel arbitration, and attached Bannister’s electronically-signed arbitration agreement. Bannister challenged the validity of the arbitration agreement, presenting evidence to the court that she never saw the agreement during the onboarding process and did not affix her electronic signature to the arbitration agreement. Moreover, Bannister provided evidence that the employer’s human resources team had instead signed the arbitration agreement electronically for her. As a result, the trial court denied employer’s petition to compel arbitration, finding that the employer failed to meet its burden to prove that Bannister actually signed (electronically) the arbitration agreement. The trial court therefore found the arbitration agreement unenforceable. The Court of Appeal affirmed the trial court decision.

Civil Code §1633.9(a) governs the authentication of electronic signatures. It provides that an electronic signature may be attributed to a person if “it was the act of the person.” The “act of the person” may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.

For example, California courts have held that an employer may establish that the electronic signature was “the act of the person” by presenting evidence that a unique login and password known only to that person was required to affix the electronic signature, along with evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions.

In Bannister, the employer provided evidence that Bannister had to enter her social security number, a client ID, and pin code to access and sign the arbitration agreement. Bannister, in turn, argued that the employer also had access to that information and therefore could have signed the agreement for her. In light of this conflicting evidence, the court ruled that the employer failed to meet its burden to prove the existence of a valid and enforceable arbitration agreement.

Employers should review their onboarding process to comply with the requirements of Civil Code §1633.9(a). When requiring an employee to sign an arbitration agreement electronically, the employer must take verifiable steps to ensure that only the employee to be bound by the arbitration agreement can sign the agreement. If you have any questions regarding the compliance of your onboarding process or would like to discuss the adequacy of the security measures you have or intend to put in place with respect to electronic signatures, please do not hesitate to contact NavBat.