California Court Rules on Whether to Compel Arbitration Where Employer Could Not Authenticate Employee’s Electronic Signature

Ruiz v. Moss Bros. Auto Group., Inc., No.E057529 (December  23, 2014): Challenges to the validity and enforcement of arbitration agreements continue to be a hotly litigated area of California wage and hour law, specifically in class and representative actions. In another such example, the California Court of Appeal, Fourth Appellate District, recently affirmed a trial court order denying an employer’s petition to compel arbitration where the employer failed to proffer sufficient evidence establishing the agreement’s electronic signature was actually that of the employee. This ruling, however, should not be read to abolish the use of electronic signatures in arbitration agreements or to limit, in any way, an employer’s right to resolve disputes through arbitration.

Ernesto Ruiz brought a putative class action with representative PAGA claims against his employer, Moss Brothers Auto Group, Inc., based on a variety of alleged wage and hour violations. The company filed a petition to compel arbitration of Ruiz’s individual claims based on an agreement he signed electronically during the onboarding process. In support of its petition, Moss Brothers produced a declaration of its business manager asserting that Ruiz consented to the arbitration agreement via electronic signature. Ruiz opposed the petition, arguing that Moss Brothers failed to meet its burden of proving that a valid arbitration agreement existed. He also argued that the company could not establish that the agreement was, in fact, signed by him. The trial court denied the petition, finding that the company’s proffered evidence failed to support the existence of a valid arbitration agreement signed by Ruiz, electronically or otherwise.

The Court of Appeal agreed, finding that the petition to compel arbitration was properly denied. The court, however, did not hold that electronic signatures were improper, but rather clarified the employer’s burden in seeking such relief. The court held that the employer has the burden to authenticate the agreement and the agreement’s signature as that of the employee (either in a hard copy document or through an electronic process). In this case, the introduction of conclusory evidence that Ruiz signed the agreement was insufficient to meet this burden of proof. Specifically, Moss Brothers failed to explain upon what basis the agreement was “the act of” the employee. While affirming the trial court’s decision, the Court of Appeal indicated this burden is not a difficult one to meet and would simply include authentication of the log-on process and acceptance of the agreement through a “unique” ID and password that serves as authentication of the employee’s signature. Since such information was not introduced or authenticated, the trial court’s order denying the petition was upheld.

Practical Impact

According to Thomas M. McInerney, the managing shareholder of the San Francisco office of Ogletree Deakins, “Ruiz underscores the importance of employers ensuring they can establish their employees have truly accepted arbitration agreements. The court reinforced how the burden of proof does not present a high threshold, but does require affirmative proof such as a unique identification and password, or some other method.”