Duncey’s Caps, Inc. hired Bud Dunop as its new human resources manager for 2018.  Bud quickly determined that Duncey’s needed a formal employee policy handbook.  Included within the handbook was an arbitration agreement requiring employees to arbitrate all claims against Duncey’s relating to the employee’s employment.

Bud then held training and review sessions with all Duncey’s employees.  At the end of each session, each Duncey’s employee was required to log into a computer with their own self-created password.  Once logged in, the employee was given the opportunity to fully review the handbook and the arbitration agreement.  The employee was then required to click a box stating that he or she “acknowledges” receiving and reviewing the handbook, and that by clicking the box they “agreed” to abide by the handbook and the arbitration agreement. The employee was then required to enter their initials and click “submit.”

A few weeks later, one of Duncey’s employees who electronically acknowledged the handbook was injured on the job.  The employee filed a lawsuit.  Will Duncey’s be able to get this lawsuit sent to arbitration?

Are electronic acknowledgments just as binding as a signed document?

It can be.  Electronic acknowledgments are no different than a signed, written document as long as the party seeking to enforce the acknowledgment proves the elements of a contract: offer, acceptance and consideration.  We’ve discussed this issue before in another context – whether email exchanges can create a valid contract.  Texas has adopted the Uniform Electronic Transactions Act, which allows parties to agree to conduct transactions by electronic means.  But an exception in the UETA is that an enforceable agreement cannot be created electronically where the law otherwise requires it to be signed and in writing.

How do employers prove that an employee electronically acknowledged an agreement?

In several recent cases, employees have disputed that they electronically acknowledged an agreement with their employer.  This raises an intriguing question: how do employers prove that an employee “signed” an agreement when there is no written signature?  Employers should have the custodian of records responsible for the company’s electronic files testify that:

  • Employees are required to enter their confidential user name and password to access the documents;
  • The company maintains an electronic record of when the employee accessed the document;
  • The document contains an agreement between the employee and the company;
  • The steps an employee must take to electronically acknowledge the agreement;
  • The specifics of the employee’s access, review and acknowledgment of the agreement.

Tilting the Scales in Your Favor

Another way to “failsafe” electronic agreements with employees is to include language that the employee’s continued employment beyond a certain date constitutes acceptance of the arbitration agreement’s terms. This language has been held sufficient to uphold the validity of the agreement, and could be the deciding factor if the employee specifically denies acknowledging the agreement the company seeks to enforce.