Wait – That E-mail Is a Legal Agreement?

By Fiona W. Ong - Shawe Rosenthal LLP

May 17, 2018

I know I’m dating myself, but as a lawyer of a certain age, I like a legal agreement to be in paper, with handwritten signatures. The growing use of electronic agreements and signatures is certainly easy and convenient, but it still gives me a little queasy feeling – like the agreement doesn’t really exist. (Don’t even get me started on bitcoin…) I don’t mean to suggest that electronic agreements and signatures aren’t valid. They certainly can be, as I discussed in detail in a prior blog post, Electronic Signatures v. Handwritten Signatures. But, as I also explained in that post, the use of electronic methods does open the door to questions about whether employees actually entered into the agreements in question, as happened in the recent case of Gupta v. Morgan Stanley Smith Barney, LLC.

In that case, a terminated employee sued his employer, and the employer filed a motion to compel arbitration. The employer argued that the employee was subject to an arbitration agreement that was e-mailed to the employee at his business e-mail address. The e-mail stated: “By continuing your employment with Morgan Stanley, you accept… the terms of the Arbitration Agreement and the arbitration provisions of the CARE Guidebook, unless you elect to opt out… by completing, signing and submitting an effective CARE Arbitration Program Opt-Out Form by October 2, 2015.” The employer argued that the employee had consented to the agreement because he did not complete the opt-out form – in other words, his silence was his consent.

The court acknowledged that, under Illinois law (state law governs contract claims – including whether a contract has been created), an offeror of a legal agreement “may construe silence as acceptance if circumstances make it reasonable to do so.” And the court found such circumstances existed here where the email described the arbitration program, explained how to opt out, and gave the employee a month to do so.

BUT, the problem was the employee swore under oath that he never received the e-mail (even though he had received and responded to numerous other e-mails sent to the same e-mail address that day!). The court found that his denial created a factual dispute about whether he received the e-mail and whether an enforceable arbitration agreement had therefore been created, and that this dispute would have to be resolved by a jury. The court noted a distinction between when an individual doesn’t recall receipt, which does not create a factual dispute under the law, and when an individual denies receipt, which does.

The employer offered affidavits from its Human Resources staff that the e-mail had been sent and received at the employee’s e-mail address – but there were several problems with those affidavits, including the fact that one of the affidavits acknowledged that the company could only state that the e-mail was sent and received – but not whether it was opened by the employee. Given all of this, the court sent the question of whether the employee received the e-mail and therefore whether an arbitration agreement existed to the jury.

What this case demonstrates is the importance of being able to establish that an employee actually received and agreed to an electronic agreement. While using silence as assent to the agreement may be easy, it may also be difficult to prove. Wise employers may wish to take the additional step of having the employee affirmatively assent to the agreement – and to ensure that the company can demonstrate it was, in fact, that employee who took that action (as opposed to someone else doing it on his or her behalf – as employees have argued in other cases).

Do you see why I long for the good old days of handwritten signatures?