Although the Federal Arbitration Act places arbitration agreements on the same footing as any other contract, it generally precludes state laws banning mandatory arbitration. However, employers must ensure that their arbitration agreements are enforceable — an issue governed by state law.
In a recent case, an employer sought to compel arbitration of claims alleging disability and race discrimination. Plaintiff opposed the motion on the grounds that neither she nor the employer had signed the agreement. Instead, in the modern world of electronic communication, the employer utilized a website and unique login credentials as part of its hiring process. The employee clicked an electronic acceptance and typed her initials to acknowledge acceptance of the arbitration agreement.
The federal district court evaluated the plaintiff’s arguments under the Federal Arbitration Act. That Act defines an electronic signature as “an 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.” Following that definition, the Court held that the plaintiff’s actions — logging into a website with unique credentials, clicking an acceptance box and typing her initials — were sufficient to bind her to the arbitration agreement. The Court rejected the argument that the employer was required to sign or otherwise execute the agreement. The employee’s conduct was sufficient to show her intention to be bound.
Employers that use arbitration agreements should ensure that the process they use to communicate agreements to employees, and to secure the employee’s acceptance of the agreement, results in a valid and provable contract under the laws of each state where the employer operates. Agreements also should define clearly whether the arbitrator or the court will evaluate unconscionability and other defenses to contractual enforcement.