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Texas Supreme Court Enforces Arbitration Agreement that was Signed Electronically

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From JDSupra, Tiffany Cox Stacy and Patrick Maher discuss a recent case before the Texas Supreme Court in which the former employees denied electronically signing an arbitration agreement but the court agreed that the company showed the employees had unique user names and passwords and the evidence showed that they had signed the agreements. Tiffany and Patrick write:

Aerotek, Inc. v. Boyd: Electronic Execution of Arbitration Agreements

Despite increasing widespread usage of electronic signatures, parties opposing arbitration frequently attack the enforceability of an arbitration agreement lacking a “wet” signature. In particular, denial of electronic execution can be more difficult to rebut than a handwritten signature for which there are likely exemplars by which to draw comparison.

To date, employers have experienced mixed results in seeking to compel arbitration of an electronically signed arbitration agreement, even though both federal and state law explicitly recognize the validity of electronic signatures on legal documents provided sufficient safeguards are maintained to ensure the disputed electronic signature was actually made by the alleged signer. The Texas Uniform Electronic Transactions Act (TUETA) recognizes that electronic signatures may take a variety of forms, including any “electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” In particular, an electronic signature may be as simple as “clicking a box” on an online document to indicate consent.

With this framework in mind, the Texas Supreme Court recently ruled in Aerotek, Inc. v. Boyd, that the electronic signatures of four former employees were valid to compel arbitration in a decision the court acknowledged would have far-reaching application. In that case, Aerotek utilized a mandatory, multistep online application process for all job applicants (except for instances requiring accommodation). The onboarding process began with a welcome email being sent to the email address identified by job applicants “during the recruitment and initial interview phase.” The email included a unique link for the job candidate to access the account registration page, which prompted the user to create unique log-in credentials and choose security questions and answers.

Thereafter, the applicant was prompted to complete and sign a variety of forms, including an electronic disclosure agreement (EDA) and mutual arbitration agreement (MAA). Once the applicant completed the process, the completed package was transmitted to Aerotek for consideration. As a candidate navigated this online process, the database logged the electronic activity, including the creation of a date and time stamp for each completed electronic signature.

In moving to compel arbitration, Aerotek provided each former employee’s time-stamped EDA and MAA and a digitized log indicating the date and time of each action taken by each former employee in completing the onboarding process. In response, the former employees tendered their own affidavits, acknowledging that they had completed the online hiring application but denying that they “had ever seen, signed, or been presented with the MAA.”

The trial court held an evidentiary hearing during which Aerotek presented the testimony of its program manager, who had been involved in the design and development of the computerized onboarding program. The program manager testified as to the onboarding process described above, as well as to the applicable security measures in place. Despite this evidence, the trial court found the former employees’ affidavits to be sufficient to preclude enforcement of the arbitration agreements, and the court of appeals affirmed.

In an 8-1 decision, the Texas Supreme Court reversed, holding that Aerotek conclusively established that the four former employees electronically signed, and thus consented to, the arbitration agreements. Specifically, as the party seeking to compel arbitration, Aerotek met its initial burden, as required under the TUETA, to offer “proof of the efficacy of the security procedures used in generating” the electronically signed arbitration agreements, such that those electronic signatures could be “attribut[ed] to [the] alleged signator[ies].” Once it did so, the four former employees, as the parties resisting arbitration, carried the burden to “offer evidence that  [the] security procedures lack[ed] integrity or effectiveness and therefore [could not] reliably be used to connect a computer record to a particular person.” In the case at hand, the court held that the candidates’ “den[ial] [of] the result that the reliable procedures generate” was insufficient to discredit Aerotek’s evidence.

The Aerotek case is a significant victory for employers seeking to enforce mandatory arbitration agreements signed electronically. Employers, however, may want to ensure that they work with reputable software vendors and adopt sufficient security safeguards to establish the authenticity of the online signature. If an electronic signature is challenged, courts are likely to require the employer to produce a witness who can verify the security and reliability of the onboarding process.

Source: Texas Supreme Court Issues Two Key Pro-Arbitration Decisions | Ogletree, Deakins, Nash, Smoak & Stewart, P.C. – JDSupra

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