This article was first published on Law360.com.
The U.S. Court of Appeals for the Eighth Circuit recently denied an employer’s request to force arbitration. This case was about arbitration, but it teaches employers important lessons about how courts will interpret concepts like “agreements” when the employer’s personnel documents are electronically stored and contain automated “acceptances.”
From this case, employers utilizing automation and intranet-based (or other electronic storage) for items like handbooks and employee contracts should carefully consider the mechanisms in place for acceptance and agreement. Automated acceptance for important documents that require the employee’s consent should be avoided to work toward ensuring those documents are enforceable in court.
In Shockley v. PrimeLending, the employer was sued by an employee alleging Fair Labor Standards Act violations. The employer, relying on its handbook policies demanded the issue be sent to arbitration, which is often seen as a less expensive, faster and confidential method of dispute resolution. The court ruled that to force an employee to take their dispute to arbitration, there must be an agreement or a contract to arbitrate. Squarely at issue was whether the employer’s automated intranet system was proof that she accepted the terms of the arbitration agreement.
The court, in ruling against the employer, found the automated acceptance was insufficient and because there was no proof of acceptance this invalidated the agreements. Automation drives efficiency and that is plainly the future of the business world. However, employers should be wary of perceived shortcuts where the law requires more.
The employer’s intranet stored employee information such as the handbook and policies. Employees who clicked on the handbook auto-generated an acknowledgment of review and a link to the full text of the handbook. Annually, the employer required employees to click into the handbook for a policy review. Within the full handbook — accessible by taking the extra step of clicking on the link — was an arbitration agreement which would have removed the employee’s FLSA claim from being heard in court to an arbitration panel.
Legally, arbitration agreements must be agreements, meaning both parties, the employer and the employee, agreed to the terms. Drilling down into whether the arbitration was truly “agreed to,” the court questioned whether the employee’s passive “clicking” acceptance was sufficient. It was unclear from the evidence offered that the employee actually accepted the agreement as opposed to simply acknowledging she saw the handbook link.
The evidence indicated the employee accessed the intranet handbook twice as a part of annual reviews, but there was no evidence she clicked on the link to the full text of the handbook. When asked, the employee’s testimony was that she “did not recall” whether she clicked into the full handbook. Therefore, the employee may have reviewed it, or she may have never seen the arbitration provision. Since it was plausible that the employee may have never seen the arbitration provision, much less agreed to it, then there was no proof of acceptance. Failing to have such proof was a “fatal flaw” according to the court.
The fatal flaw had a second effect. The employer also had a so-called “delegation” clause in its handbook which means an arbitration panel, and not a court, would determine the enforceability of the arbitration provision. Like an arbitration agreement, delegating enforcement questions to the arbitrator requires agreement by both parties. Because the passive clicking without evidence the employee reviewed the handbook was insufficient, both the arbitration and delegation clauses were invalidated.
The case may have significant effects on employers because it suggests employers take a step back and think about their human resources operations. Here, this employer specifically sought to remove disputes from the court, including interpretation of the policy. Because of a lack of proof, those policies were overridden by the court’s ruling.
Many employers utilize intranets for company policy storage and access. Automating the process of employee communication is effective and efficient, and therefore, attractive. However, when the employer wishes to bind the employee in these ways, a different approach appears advisable to avoid the court’s after-the-fact overriding of the employer’s policy choices.
It is difficult to make a one-size-fits-all approach because the “old” way, before intranets, was to give employees a hard copy and obtain a signature. Envision onboarding before intranets and online storage — there was a large stack of papers that the employee readily signed. Regardless of the automation or hard-copy signature, any number will say the same thing as this employee — “I didn’t read it” or “I don’t remember signing that, there was a stack of papers I was required to sign.” With that in mind, the employee “clicking” through seems similar to the employee who signs the stack of papers in front of them.
However, for the court, this passive activity and uncertainty about whether the employee accessed the full text were enough to invalidate the agreement. Because of the weight that courts give to hard-copy signatures, it seems likely the court would have enforced the agreement if there were a hard copy and an actual signature. The court did not compare and contrast the “old” way with the situation before it but given the court’s emphasis on the mechanics of the automation, it is suggestive that the court would have accepted a signature on a paper affixed to a printed handbook.
Learning from the court’s analysis, if employers are going to make any agreement with employees — arbitration or otherwise — the employee’s agreement must be secured and provable after the fact. It seems like the court wanted evidence that the handbook link was accessed, that the employee made an affirmative step toward acceptance. This could be accomplished through an electronic signature, or even two clicks confirming acceptance. This type of additional step is used by some companies by requiring a user to scroll to the end of the agreement before clicking “I accept.” Employers are only limited by their imaginations as to how they will add these additional steps to remove their systems from being considered a passive click to an enforceable agreement.
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