Is My Electronic Signature Binding?
Agreements may not be denied legal effect because they are in electronic form or have an electronic signature. California’s Uniform Electronic Transactions Act states,
[a]n electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.
Many companies require new employees to sign key documents and policies electronically. Former employees challenge these signatures as inauthentic—particularly when trying to avoid arbitration agreements. Employees claim they either never signed the documents or cannot remember signing the document. Judges take these challenges seriously and hold employers to high standards to properly authenticate the employee signatures.
For “wet” signatures, it is usually fairly routine to authenticate a document. You show the employee the signature and confirm it is their signature. Or, the employee confirms a signature on one document with a sufficiently similar signature. Or, someone testifies they witnessed the signature.
How do you Authenticate an Electronic Signature?
Although the CUETA does not require heightened scrutiny of electronic signatures, many courts sometimes apply a seemingly heightened standard. In Ruiz v. Moss Brothers Auto Group, the trial court refused to enforce an electronically signed arbitration agreement based on authenticity questions. The employee claimed he did not sign the agreement, and would never have signed the agreement. The employer submitted a declaration claiming each employee logged into the HR system with a unique username and password to review and sign the agreement. The court said this was insufficient evidence to authenticate the signature.
The court noted the declaration did not explain that the electronic signature could only have been placed on the agreement by a person using the employee’s unique username and password. The declaration did not explain that the date and time printed next to the electronic signature indicated the date and time when the electronic signature was made. The employer did not explain that all employees were required to use their unique usernames and passwords when they logged into the HR system and signed electronic forms and agreements.
In a more recent decision, Espejo v. Southern California Permanente Medical Group, the court clarified what an employer must show to authenticate an electronic signature. Contrasting Ruiz, the court noted the employer offered “the critical factual connection that the declarations in Ruiz lacked.” The court pointed out the employer’s declaration detailed:
- The electronic review and signature process for employee agreements,
- The security precautions regarding transmission and use of an applicant’s unique user name and password, and
- The steps an applicant would have to take to place his or her name on the signature line of the agreement.
The court determined the employer had a sufficient process in place to enable the systems consultant to properly authenticate the signature.
Electronic Signature Best Practices
If you are going to use electronic signatures, make sure your IT department can authenticate the signature. Can IT to determine when and from what IP address the document the employee signed the document?
You must be able to confirm no one but the employee could have signed the document, and that the employee in fact signed the document. Employees should have unique usernames and passwords to access the documents, and should create their own employee-created password before signing documents.
The company’s e-signature policies must comply with the CUETA and the federal E-SIGN Act.
If you are going to require electronic signatures, inform employees they need to review every document. Allow the employees to print the documents and provide sufficient time for review and execution.
Electronic signatures may be the wave of the future, but if done improperly, the employer may not get a second byte of the apple.
Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.
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