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California Court Rejects Argument that Employment Contract Was Modified by an Email Signature

In a significant 2023 decision, the California Court of Appeal affirmed that an employment contract was not modified by an email exchange, finding that simply including a name and contact information in an email signature is not sufficient to constitute an electronic signature showing intent to modify the contract.

The case, Park v. NMSI, Inc., involved a dispute between two employees, Julie Park and Danny Chung, and their former employer NMSI, Inc., a residential mortgage lender. Park and Chung had employment agreements entitling them to a percentage of the net revenue generated by loans originated from their branch office.

In 2019, NMSI's CEO proposed changes to the compensation structure. NMSI argued that Chung had agreed to these changes in an email exchange, and the modified compensation had gone into effect. However, Park and Chung sued, alleging breach of contract and failure to pay wages under the original agreements.

The trial court found that Park and Chung had established the probable validity of their breach-of-contract claims. It rejected NMSI's arguments that the email exchange or the parties' subsequent conduct had modified the 2019 agreements.

On appeal, the court agreed. It held that under the Uniform Electronic Transactions Act (UETA), an electronic signature must show an intent to sign the record. Simply including a name in an email signature block is not enough - evidence of intent must exist. The court found the email exchange reflected ongoing discussions, not an executed agreement to modify the contract.

The court also found no evidence that the parties' conduct had modified the agreement, such as Park and Chung confirming the new calculations. Waiver of a contract provision prohibiting oral modification requires evidence that waiver was the parties' intent.

The key lessons are:

  1. An electronic signature under the UETA requires intent to sign, not just a typed name.

  2. A contract prohibiting oral modifications can still be orally modified if the modification is executed, but the parties' intent is key.

  3. Substantial evidence is required to show a party waived a known contractual right.

This case illustrates that a formal written modification may be required to alter an employment agreement, even if compensation is changed in practice. Consulting an employment attorney can help parse these issues. If you have questions about your employment contract, contact the Law Office of Jack Kakoian for a consultation.

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