On September 15, 2021, a divided panel of the Ninth Circuit Court of Appeals decided…
Longtime readers of this publication are aware that the author champions valid arbitration policies as being among the most potent form of legal protection available to employers. It can be viewed as the “great equalizer” in the world of California labor law.
This is because, in the absence of such an agreement, employers who are sued by current or former employees will be forced to convince a jury of their defense arguments. Employers overwhelmingly lose jury trials, because juries are typically comprised overwhelmingly, if not exclusively, of employees as opposed to business owners, supervisors or managers.
For obvious reasons, juries are more sympathetic to the plaintiff-employee. By the same token, plaintiffs’ lawyers are less inclined to take such cases, because their chances of convincing an arbitrator are perceived as being weaker than their prospects of convincing a jury. Plaintiffs’ lawyers are typically paid a percentage of any amount won in settlement or awarded in the form of a jury verdict.
Perhaps as importantly, the cost of defending an employment case through a jury trial frequently exceeds a million dollars, and sometimes much more – just in defense costs. By contrast, the cost of defending a case before an arbitrator can be reduced as much as 90 percent. In short, this means that, absent an enforceable arbitration policy, many employers simply cannot afford the cost of a defense, regardless of whether they have acted unlawfully. Such employers, whether or not they acted unlawfully, are typically forced to accept settlement terms dictated by plaintiffs and their counsel.
It is therefore no overstatement to say that, without a legally-enforceable arbitration agreement, many employers are rendered defenseless – literally – if they are sued. They are presently conducting business operation, unwittingly, at the mercy of whether nor not an employee decides to file a lawsuit. In sue-happy California, this leaves little room for comfort.
For these reasons, it is the author’s opinion that a legally-enforceable arbitration policy is indispensable to most California employers. However, the plaintiff’s bar is constantly challenging the legality of arbitration policies, making it imperative that employers submit their policies to a labor law expert for legal review, assuming such an expert has not actually drafted the policy as recommended.
In the recent case of Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, the defendant employer fired the plaintiff from her position in a skilled nursing facility it purchased a year earlier. The plaintiff sued the employer, alleging unlawful discrimination, retaliation and related claims. The employer promptly filed a motion to compel arbitration, based on the mandatory arbitration policy the plaintiff signed with an electronic signature shortly after the defendant assumed control of the facility. The plaintiff responded by denying that she had electronically signed the arbitration agreement.
The employer introduced evidence showing that only the plaintiff could have signed for the arbitration agreement. In order to sign the agreement, the employer required that employees enter their first and last name, social security number, client ID and pin code. However, both the ID and pin code were common to all employees.
The plaintiff countered that she never reviewed or signed the arbitration agreement. She emphasized that the client ID and pin code needed to acknowledge the arbitration agreement were not unique to her, and social security numbers were readily accessible in the company’s employee personnel files.
The trial court denied the motion to compel arbitration for the reason that the employer failed to satisfy the rigid requirements of the California Uniform Electronic Transactions Act. The Court of Appeal agreed that the employer failed to properly authenticate the plaintiff’s e-signature, holding that it fell short of establishing that the plaintiff was the only individual who could have signed the agreement, to the exclusion of all others.
While precautions are available that may have overcome the arguments that proved fatal to the employer in the Bannister case, the safest approach is to require employees to acknowledge receipt of stand-alone arbitration policies or agreements with a “wet” signature, as a means of avoiding the tricky authentication issues associated with electronic signatures.
Given the enormous stakes involved, as summarized at the outset of this article, this case illuminates a maxim emphasized again and again in this publication: “An ounce of prevention is worth a pound of cure.”
Jay G. Putnam is a northern California labor lawyer who has specialized in representing employers for over 40 years. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives. He has a remarkable record of success: Not one employer-client acting on his advice has been sued in over 40 years.
For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well.
You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them. http://www.jaygputnam.com/newsletter/
This newsletter is not intended as a substitute for legal advice and its content is provided for discussion purposes only. Any suggestions or recommendations must be assessed by competent legal counsel to be sure the unique requirements of each workplace are properly considered.