Prepare to Provide Details of Proof for Onboarding Documents, Arbitration, and E-Signatures

With e-signatures becoming ubiquitous for employers, we want to alert employers using electronic on-boarding processes about a recent Federal district court case in California: Zamudio v. Aerotek, Inc..

Employee Denies She Signed Arbitration Agreement

A staffing agency, Aerotek, placed Zamudio with Caterpillar, Inc. in California. In 2019, Zamudio signed the onboarding documents through an electronic system called Onboarding Automation—including an electronic arbitration agreement. She was fired after hurting her back at work, leading to a lawsuit with predictable FEHA claims. Aerotek removed the case to federal court and moved to compel arbitration.

But Zamudio denied she signed the arbitration agreement, resulting in the district court recently denying the employer’s motion to compel arbitration. The case provides a succinct and useful review of what employers need in their e-documents to compel arbitration—essentially, proof it was actually the plaintiff that signed the e-agreement.

The court first gave the following recap of what is needed for a federal court to compel arbitration: First, is there an agreement to arbitrate? Second, does the agreement cover the claims involved? If both answers are “yes,” the court does not likely have discretion to deny a motion to compel. But the agreement to arbitrate must be “clear.” And that clarity must flow from state law covering contract formation, with doubts erring on the side of arbitration regarding issues in dispute, but not as to who signed the agreement.

The presumption favoring arbitration does not apply to determining whether a party entered the agreement, it only applies to what disputes are covered by an agreement. Essentially, you arbitrate what is disputed, but not who signed an agreement—which is left to the court. Which is why the Zamudio court ruled on the fundamental question: did Zamudio sign an arbitration agreement?

The defendants had the burden to show she did. In some cases, this is met initially by simply attaching the signed agreement to the motion. But when a plaintiff challenges the signature’s validity, defendants must show “by a preponderance of the evidence” the signature is real.

Here, the court looked at California law. Namely, the Uniform Electronic Transaction Act from 2000, which approves e-signatures as real signatures “if it was the act of the person.” Proving the act can be done by showing the security procedures covering the signer, such as creating and using a password.

After providing that background, the court then reviewed the cases that found for valid e-signatures and the cases finding against them. The court found the pro-authentication cases (a 2016 state case, Espejo v. S. Cal. Permanete Med. Grp., and federal cases Tagliabue v. J.C. Penney (2015), Hose v. Wash. Inventory Servs. and Taft v. Henley Enters (both from 2016)) all had evidence showing reliable processes for the signatures. The court noted the mere act of an employee having their own username and password was enough to prove reliability. Typically, in these cases, proof of a valid plaintiff e-signature comes from HR declarations. But crucially, it depends on what those declarations say.

Tagliabue involved two HR declarations. The first said the plaintiff signed the agreement, the second provided 20 steps new hires had to follow, together showing it was the plaintiff who signed. Espejo was similar: the declarations set forth the security precautions as to both 1) transmission and 2) use of a unique username and password. Importantly for the Zamudio court, the Espejo defendant didn’t just explain the security measures, it also gave the date, time, and IP address where the documents were signed.

For the cases denying arbitration for lack of proof of a valid signature, the court reviewed California’s Ruiz v. Moss Bros. Auto Grp. (2014) and the federal case of Smith v Rent-A-Crt. (2019). A declaration of a unique login ID and password by the employee was not enough to authenticate the signature in Ruiz. That was because the defendant did not explain how the printed electronic signature, or the date and time printed next to it, appeared on the agreement.

Username, Timestamps, and IP Addresses

In Smith, the defendant’s declaration didn’t explain how it had to be the plaintiff who created and entered the password, or who was the actor who e-signed the agreement. The Smith court sought an audit trail and noted the lack of information about the username, timestamps, and IP addresses. Thus, the declaration merely concluded the plaintiff signed it, but did not show the steps necessarily taken by the plaintiff to prove he signed it.

In Zamudio, the court found Aerotek’s proof-of-signature had the same problems, thus failing to show that Zamudio signed the arbitration agreement. There was no:

• specifics as to onboarding,
• specific personal information Zamudio provided, which would show it had to be her entering it,
• basis for the HR rep to conclude it had to be Zamudio,
• detail of the steps Zamudio had to take to create her onboarding account or sign the arbitration agreement,
• mention of her username,
• showing her password had to be set by her to use her account,
• showing as to her account’s privacy,
• discussion of IP addresses,
• discussion of security to protect passwords,
• discussion of security protecting transmission or storing the information, and
• proof someone else could not have accessed the account and/or signed the agreement.

This last point was “crucial” for the Zamudio court’s conclusion. There was not “Tagliabue or Espejo” type information, thus it suffered from “Ruiz or Smith” lack of proof the plaintiff signed the agreement. This necessitated the court’s denial of the motion to compel arbitration.

What to make of Zamudio and its overview of using e-signatures with onboarding—and, in particular, arbitration—documents? It seems employers can still use software systems and e-signatures. But they must be prepared to prove it had to be the plaintiff who used the system and filled out the documents. Employers’ declarations on this point need details of that proof, not mere conclusions. Explain the process, provide the IP address, and describe the system’s security. Go beyond declaring to the court “it had to be the plaintiff who signed this”—explain how you know it was the plaintiff who did it.

To sum it up, review the list above and make sure your system can provide those details.

Questions or Deeper Analyses?

If you have questions or need deeper analyses, please call us, or send a confidential email to info@cjattorneys.com. If you are looking for news on another topic, all of our newsletters are on our website here. If you do not wish to receive these client updates, simply click the “Unsubscribe” button below.

As always, we appreciate the trust you put in us to provide you with a proactive and customized legal strategy to keep your reputation intact in the areas of employment law and healthcare law.

Best,

Keith W. Carlson and Nima A. Jalali