ARBITRATION AGREEMENT ENFORCED DESPITE EMPLOYEES’ SWORN DENIAL OF AGREEMENT AND E-SIGNATURES

Aerotek, Inc. v. Boyd
Supreme Court of Texas, No. 20-0290 (May 28, 2021)
Chief Justice Hecht (Opinion, linked here); Justice Boyd Dissenting (linked here)
In Aerotek, the Texas Supreme Court overturned the decisions of a trial court and court of appeals that refused to compel arbitration between the company and certain of its employees. In the process, the Court significantly bolstered parties’ ability to rely on electronic signatures and digital contracts.

When four Aerotek employees sued the company for discrimination and retaliation, Aerotek moved to compel arbitration of the dispute, relying on an arbitration agreement that it alleged was part of the employees’ digital “onboarding process.” Aerotek presented evidence that each of the employees had electronically signed both (1) the arbitration agreement and (2) an “Electronic Disclosure Agreement” by which the employee consented to be bound by Aerotek’s electronic hiring documents as though they had been signed manually and in person. Aerotek’s witnesses explained the security and reliability of its digital process, including that the protocol required the employees to have electronically “signed” the arbitration agreement before they could proceed with the rest of the “onboarding” procedures or submit their employment applications to Aerotek. An Aerotek employee further testified that the company could not alter the application and agreements once they had been submitted. Each of the plaintiff employees agreed he consented to the Electronic Disclosure Agreement, but expressly denied having electronically signed the arbitration agreement. Each asserted that the arbitration agreement was not even included among the materials displayed to him during the onboarding process. The trial court denied the motion to compel, and a divided court of appeals affirmed.

Applying the Texas Uniform Electronic Transactions Act, the Supreme Court held that, “once Aerotek proved its security procedures, the burden shifted to the Employees to demonstrate how their electronic signatures could have wound up on the [arbitration agreements] without their having placed them there themselves,” and most importantly, that “mere denials do not suffice” to sustain that burden. To contest an electronic signature, a party may “offer evidence that security procedures lack integrity or effectiveness and therefore cannot reliably be used to connect a computer record to a particular person,” the Court said, “but that attribution cannot be cast into doubt merely by denying the result that reliable procedures generate.”

Justice Boyd dissented. Relying on a 90-year-old decision of the Commission of Appeals, Ward v. Weaver, Justice Boyd would have held that “the employees’ sworn denials constitute legally sufficient evidence to create a fact issue” and that the Supreme Court “has no constitutional or other authority to weigh conflicting evidence” and resolve this case by crediting only the testimony presented by Aerotek and giving no weight to the employees’ sworn denials.

From a practical perspective, the Court’s decision enhances businesses’ ability to rely on electronic processes to prove agreements, further facilitating the state’s growing e-commerce economy. But the decision makes it more difficult for the average individual, with no expertise in the inner workings of such computer processes, to contest electronic records of transactions that he or she genuinely disputes.

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