Electronic Onboarding and Arbitration Agreements: The Hasty case
Are you an employer that provides electronic onboarding for your employees? In this digital age, many companies have made the switch from paper forms to a fully paperless system. With paperless onboarding, new hires complete all of the compliance paperwork and training they normally would in a traditional onboarding process. However, employers should be aware that this system is not fool-proof. The most recent California appellate case of Hasty v. American Automobile Association of Northern California is a fresh reminder for how to avoid pitfalls with electronic new hire forms, particularly arbitration agreements.
In Hasty, the plaintiff was verbally hired as an insurance agent, which she accepted, but without the knowledge that there would be an arbitration agreement to sign. She was e-mailed links to review and sign onboarding hire forms, which included the company’s arbitration agreement. Hasty electronically signed on her smart phone a number of documents, including, unbeknownst to her, the company’s arbitration agreement. Although the written employment offer indicated Hasty would sign an arbitration agreement on the first day of her employment, Hasty declared she did not physically or electronically sign an arbitration agreement on the first day. She was also provided employee handbooks after the start of her employment which referenced the arbitration agreement.
After her dismissal from the position, Hasty sued the employer for various labor and employment law violations. The company responded by filing a petition to compel arbitration, according to the arbitration agreement that she signed.
The trial court found that, although the employer established there was a valid arbitration agreement between the parties, the arbitration agreement was unconscionable. The court explained, among other things that: “…there is a high degree of procedural unconscionability based on the adhesive nature of the [a]rbitration [a]greement, the significant degree of prolix and hidden terms, undefined terms, and the questionability of [Hasty’s] assent to arbitration.”
In upholding the trial court’s decision, the appellate court provided us with a reminder of the law with respect to determining the validity of arbitration agreements:
An agreement to submit disputes to arbitration is valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract.’ … Generally applicable contract defenses, such as…unconscionability, may be applied to invalidate arbitration agreements without contravening the Federal Arbitration Act or California law. … A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. Under this standard, the unconscionability doctrine has both a procedural and a substantive element. … Procedural unconscionability addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. … Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. … Both elements must be present for a court to refuse to enforce an arbitration agreement. … However, the elements do not need to be present in the same degree and are evaluated on a sliding scale. … The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement.
We will focus on the procedural unconscionability aspect in this article (although the court also found the presence of substantive unconscionability). Breaking down the two prongs of procedural unconscionability, the court noted that although there was no oppression, there was indeed SURPRISE. The element of surprise occurs where the arbitration agreement is “written in an extremely small font with visually impenetrable paragraphs filled with statutory references and legal jargon.” Also, surprise can be further be shown when “the agreement appears to have been drafted with an aim to thwart, rather than promote, understanding, thereby undermining the non-drafting party’s informed consent.”
Here are just some of the court’s findings with Hasty’s problematic onboarding process:
- Hasty had one option to review and sign the arbitration agreement—she had to sign it electronically, even though her offer letter stated that she would review and sign the arbitration agreement on her first day of employment;
- The employer failed to inquire into whether Hasty had the ability to view the documents electronically and did not appear to provide any other alternative, such as to view the documents at an office on a computer or to pick up the physical documents for review before signature;
- While the agreement permitted Hasty to retrieve signed documents, there was no direction on how to retrieve documents for review before signature, especially in light of the company’s insistence that Hasty sign the agreement before her first day of work;
- Also Hasty did not have a computer when she electronically signed her employment paperwork and viewed the documents, including the arbitration agreement, on her phone, which had a small screen.
Let us lastly take a look at the various takeaways for employers utilizing electronic onboarding:
- Employers should ensure that they are conveying a uniform message to the new employee throughout the hiring process beginning with the interview and verbal hire and continuing all the way through to the signing of electronic documents;
- All versions, past and present, of hire forms and agreements should be archived;
- Arbitration agreements should be provided in easily accessible paper form as an alternative to the electronic version;
- Inform employees how they may access the hard copy versions of documents;
- Alert employees ahead of time to the fact that they will be signing an arbitration agreement and find out if it will be accessed on a regular-sized computer screen;
- Options for new hires to ask for more time to look over documents is never a bad idea;
- Carefully review your digital transaction platform: Does it provide information about whether the document was opened? Does it inform you on the length of time the employee viewed the document? Does it tell you when the document was signed electronically? Does it ensure that the employee must open and review the entire document prior to being allowed to sign it? Does the signature page alert the user as to what type of document is being signed?
- Review the enforceability of your arbitration agreement in light of the unconscionability standards utilized by such courts as Hardy.
Do you have questions regarding your hiring procedures or the substance of your arbitration agreements and other employment documents? Rosasco Law Group can review your onboarding methodology to ensure that the new hire process goes smoothly.
