Employers – Be VERY CLEAR When Including Arbitration Agreements in Online Applications

Category: Federal & State Compliance

Written by Fiona W. Ong from Shawe Rosenthal LLP  on August 28, 2024

Employers must pay particular attention to “the realities of the digital realm” when requiring arbitration agreements as part of an online application process. Thus, in Marshall v. Georgetown Memorial Hospital, the U.S. Court of Appeals for the Fourth Circuit refused to compel arbitration of an applicant’s failure to hire claim although the arbitration agreement was contained – or in actuality, buried – in the employer’s online application materials. (Note that our Top Tip this month discusses other arbitration agreement issues that employers should consider).

Background of the Case. When applying for the first time, an applicant was required to scroll through (and was directed to read) a “Pre-Employment Statement” that included an arbitration agreement before reaching a space for an e-signature, with an acknowledgement that “By checking the box above next to the `I ACCEPT’ button, I am . . . agreeing to the PRE-EMPLOY[ME]NT STATEMENT which contains the Agreement to Arbitrate[.]” An applicant could not submit an application until they checked the box and provided an e-signature. The applicant in this case went through this process in 2016, and was not hired at that time.

But when she re-applied in 2020, there was a different process. As a returning user of the online application system, the applicant’s prior information was populated into the current application, and she could make changes. At the top of the webpage was a “submit” button, but only by scrolling down the page would a returning applicant see the pre-employment statement with the pre-populated acceptance of the arbitration agreement. A returning applicant was not, however, required to scroll down the page in order to submit a new application.

The Court’s Ruling. The Fourth Circuit found that the 2020 process did not provide the applicant with reasonable notice of the arbitration agreement. It was not sufficient that the applicant could have scrolled down to see the arbitration agreement – she was not on notice that the following screens included a contractual arbitration provision. The Fourth Circuit found that a party’s duty to read a contract “does not morph into a duty to ferret out contract provisions when they are contained in inconspicuous hyperlinks, or can be found only by scrolling down through additional screens.”

In addition, the Fourth Circuit rejected the employer’s argument that a statement at the top of the webpage – that the application and application process were subject to arbitration under state law – should have put the applicant on notice that an agreement was somewhere in the application materials. As the Fourth Circuit noted, the statement did not refer to the actual terms of the agreement, but rather conveyed that the application was already subject to arbitration by operation of state law.

Lessons for Employers. It is important for employers that wish to include arbitration agreements in online applications to ensure that the applicant is aware of the arbitration provision and that they specifically agree to it. Some possible ideas to consider include:

  • Providing a clear and conspicuous notice at the top of the application that it contains an arbitration agreement;
  • Requiring applicants to scroll through the agreement in order to reach a submission button;
  • Requiring applicants to acknowledge by signature specifically that they are aware of and agree to the arbitration agreement; and
  • Stating in the agreement that it applies to the current as well as any future