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Do You Require Your Employees to Electronically Acknowledge Arbitration Agreements? Make Sure Your Process Is Effective.

Note Pad, Pen, and Glass of Water at Table

It should go without saying that, when an employer presents an employee with an arbitration agreement, it is not enough for the employee to sign the document simply, “I’ve reviewed the agreement.” An employee must affirmatively agree to or, in legal terms, accept the contract.

The same is true for agreements presented to employees electronically. Reminding employers of this, the Eighth Circuit Court of Appeals (which governs Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) last month affirmed a district court’s refusal to compel arbitration where the employer could, at best, show that the employee acknowledged her review of the arbitration programs (and possibly not even that much) — but did not actually agree to arbitration. See Shockley v. PrimeLending, No. 18-1235 (8th Cir. July 15, 2019).

In that case, the employer maintained its employee handbook, which contained a dispute resolution/arbitration provision, on a network accessible by its employees. When an employee clicked on the Handbook, the system automatically generated an acknowledgment of review, advising the employee that by entering the system, she acknowledged her review of the material. It also generated a pop-up window with a link to open the full text of the handbook. It did not record whether the employee clicked on the hyperlink, or require the employee to affirmatively agree to the arbitration provision. The employer required its employees to review the handbook annually and presented evidence that the plaintiff twice entered the system, thus generating the automatic acknowledgment.

The court held that the employer’s process stopped short of what was required to demonstrate a valid contract. Its software did not require employees to actually click the link to open the handbook, much less the specific arbitration policy, or record when they did. Its policy did not advise employees that their continued employment would constitute acceptance of the arbitration provision. And the employer did not require the employee to affirmatively  “accept” or “agree” to the arbitration provision.

Luckily, this case result can be explained by the employer’s misstep. There are any number of recent cases in which courts compelled arbitration based on employees’ electronic agreements to arbitrate. Typically, after being advised by the employer that they must review and agree to the arbitration agreement (often as a condition of continuing employment), the employee inputs his or her unique login identification and password into the employer’s intranet, clicks on the link to review the arbitration agreement, then indicates (through electronic signature, check box or otherwise) their agreement to arbitrate. The employer’s system captures the date and time that the employee reviewed the policy and signed the agreement. (Most states also allow acceptance by continued employment — as long as the employer can prove that the employee had adequate notice; capturing evidence of an employee’s electronic review is essential to showing that notice if an employer plans to rely on acceptance by continued employment.)

The bottom line: after expending resources to prepare a sound arbitration agreement, employers should make sure their implementation process results in an enforceable contract.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.