Employee Bound by Emailed Arbitration Agreement Despite Denial of Knowledge

Although the employee denied he ever saw the emailed mandatory arbitration agreement, the U.S. Court of Appeals for the Seventh Circuit found the agreement to be enforceable based on the employer’s notification actions.

In Gupta v. Morgan Stanley Smith Barney, LLC, the employer sent a revised arbitration agreement to all employees, stating that it was mandatory unless the employee individually elected to opt out. The email, which contained a link to the opt-out form, also clearly stated several times that if the employee did not opt out within the 30-day deadline, continued employment would be deemed consent to the terms of the agreement. The employer also posted continual reminders of the deadline on the company intranet, and repeatedly stated that silence would be construed as acceptance of the agreement. The employee did not respond to the email or opt out, and he continued to work for another four years.

Under Illinois law, an individual may agree to a contract by his actions, rather than by signature, and silence may constitute acceptance if reasonable under the circumstances. In this case, the Seventh Circuit found that in the context of the employer’s repeated efforts to ensure that employees were notified of the new agreement and the deadline for opting out, as well as the consequences of not opting out, the employee’s silence and continued employment indicated agreement to be bound by the arbitration agreement.

The enforceability of a contract is a matter of state law, and not all states permit employers to construe silence as consent to the agreement. Nonetheless, this case reinforces the need for employers to make thoughtful and thorough efforts to inform employees of new policies and agreements.