E-Signatures: Can Keystrokes Carry the Same Legal Weight as Pen Strokes?

A blue fingerprint with the "at" symbol in the centerThese days, many employers don’t bother to print employee handbooks, training attendance forms or other employment documents.

Instead, those documents exist solely in electronic form, acknowledged by employees using so-called electronic signatures instead of written ones.

But do those e-signatures carry the same legal weight as written signatues and contracts? Yes. Nearly all jurisdictions recognize the legality of electronic signatures. However, it’s vital that you have a system to authenticate that such a “signature” was really executed by a particular employee or applicant.

A handful of court cases have shown that sloppy authentication can lead courts to nullify “signed” agreements.

Example No. 1: When Ernesto filed an overtime lawsuit, his employer tried to send the case to arbitration because Ernesto had electronically signed an arbitration agreement years earlier. Ernesto denied signing it. The company showed the date and time he had allegedly clicked through to “sign” the paperwork. But the company had no specific proof that it was truly Ernesto doing the clicking, other than to say someone signed using his password. That wasn’t enough, the court said, because the company did not “authenticate” the e-signature. (Ruiz v. Moss Brothers Auto Group, Court of Appeal of California)

Example No. 2: A few years ago, an employee argued that an HR document must have been accidentally signed electronically by his secretary who had logged onto his computer. The court tossed out the e-signed agreement, saying the company, “did not have adequate procedures to restrict authorized access to the screen which permitted electronic execution … (or) to determine whether electronic signatures were genuine.” (Kerr v. Dillard Stores, D. Kan)

Advice: Work with IT to build in multiple layers of authentication. At a minimum, provide employees with email confirmation that you received their electronic signature. Another option: Require employees to use a unique login to get onto the digital HR system to sign documents.

Your process should involve HR, key managers, IT people and your attorney. The key is to incorporate company policies, procedures and IT capabilities in a way that allows you to meet the legal challenges presented by electronic communications.

Once developed, put the policy in writing and include it in your employee handbook. By consulting with your attorney, you can make sure your policy conforms to the particular form of UETA on the books in your state. Employers that operate in more than one state should adjust policies accordingly.

Court decisions have consistently held that signatures must be traceable back to the individual signer to be valid. Your system should show that the document was not altered at any time. In other words, to have a valid contract both parties must have signed the same document. Further, the system must not allow either party to change a document after signing it.

Once the system is in place, train everyone using it so each individual understands what constitutes an electronic signature and the consequences of electronic signing.

E-Signatures: Two key federal laws

Two federal laws establish the legality of electronic signatures in the United States.
The Uniform Law Commission drafted the Uniform Electronic Transactions Act (UETA) in 1999, providing states with a template to regulate electronic signatures. Many states adopted UETA, but many modified the original template to suit their needs. As a result, each state has a slightly different law governing e-signatures.

UETA prohibits refusing to accept an electronic signature simply because it is electronic. It requires that the signature be considered valid if the person “signing” knowingly used a “security measure.” That’s defined as any procedure used to verify an electronic signature, record or performance, including the procedures that use algorithms, codes, identifying words or numbers (PINs) or other accepted procedures.

The federal government passed the Electronic Signatures In Global and National Commerce (E-SIGN) Act in 2000 in order to provide the same legitimacy to electronic signatures in interstate or foreign commerce. E-SIGN requires the signer to give permission for the electronic signature to have the same effect as a physical signature.