A Central District of California court recently held, in the matter of Rosas v. Macy’s, Inc., case no. 2:11-cv-07318-PSG-PLA,that the electronic signatures of three employees constituted consent to their employer’s arbitration policy, and were therefore compelled to arbitrate their wage-and-hour claims. In granting defendant Macy’s, Inc.’s motion to compel arbitration, the court concluded that there was a binding agreement to arbitrate employment-related disputes. The court further concluded that plaintiffs had electronically signed the arbitration agreement, reasoning that the personal information required for completion of the online arbitration forms suggested that “only the Plaintiffs themselves could have completed the online forms and affixed their electronic signature to them.” This holding is in line with California’s adoption of the Uniform Electronic Transaction Act, which provides that a signature “shall not be denied legal effect or enforceability solely because it is in electronic form.”

Under Macy’s’ arbitration policy, employees have 30 days from receipt of the policy to opt out of arbitration. They acknowledge the policy and their right to opt out by signing the policy “electronically” online. A Macy’s’ employee’s electronic signature consists of his or her social security number, month and day of birth, and zip code. The policy provides that employees may opt out of the policy by submitting to Macy’s an opt-out election form. The policy also provides that failing to opt out of arbitration within the 30-day grace period is treated as consent to the policy. In this case, all three plaintiffs electronically signed their acknowledgement of the arbitration policy; none of them, however, submitted an opt-out election form.

One important implication of this holding is the domino-effect it will have on companies’ decisions for the electronic signing of other employment-related documents, such as offer letters, confidentiality agreements, and meal and break period waivers. Another considerable benefit will be the organizational and storage efficiencies it will bring to employers as they become liberated to “go digital” with much of their new hire paperwork. Employers will be able to further eliminate incommodious hard copies of documents and streamline human resources processes, thus freeing employees to focus their time and energies on more pressing business matters. As a threshold precaution, however, employers must be careful to assign unique electronic identifiers to their employees before following in Macy’s’ footsteps. The Rosas Court based its decision largely on the fact that personal information was required to “sign” the arbitration policy and only two other people with Macy’s had that information. Therefore, it will be imperative for any company wishing to go digital to utilize or assign unique identifiers to applicants and to minimize the number of people in the company that can access them.

Please contact Anthony V. Lupo, Harry I. Johnson, III, or Stanley G. Stringfellow II if you have any questions about the holding in Rosas v. Macy’s, Inc., or the potential impact of this decision on businesses.