Employers increasingly are relying on electronic signatures in personnel records and other documents relevant to employer-employee relationships. Both state and federal laws treat “electronic signatures” as valid as so-called wet signatures, but only when the electronic signature meets statutory requirements. Employers must carefully comply with these conditions to ensure electronic signatures on arbitration agreements, employment contracts, handbooks receipts, and other acknowledgments not only are legally enforceable but also have evidentiary value.

Agreeing to Conduct the Transaction Electronically

California’s Uniform Electronic Transactions Act (UTEA) and the federal Electronic Signatures in Global and National Commerce Act (E-SIGN) require the parties to agree to conduct a transaction electronically for the electronic signature to be enforceable. The agreement to conduct the transaction electronically must be separate from the underlying transaction.

There is no prescribed form of agreement. But if there is ambiguity, a court will have to decide based on the circumstances, including the parties’ conduct. For example, despite emails, texts, and voicemails between the parties specifying the terms of a settlement agreement, the Ninth Circuit Court of Appeals found in J.B.B. Inv. Partners, Ltd. v. Fair, that the parties never agreed to conduct the transaction electronically. So, the defendant’s printed name on an email, which set forth the terms of the agreement, did not qualify as an enforceable, electronic signature.

Ensuring the Electronic Signature is Attributable to the Employee

Anyone with decent computer skills can mock up something that looks like a bona fide electronic acknowledgment. If an employee challenges the signature on an electronic document as not his or her own, the employer carries the burden of demonstrating the signature was the “act of the employee” under the UTEA.

One can imagine a former employee’s denying that a computer-printed name or random series of numbers and letters on a form constituted the employee’s enforceable agreement to arbitrate. The employer in Ruiz v. Moss Brothers Auto Group, faced that problem when an employee refused to admit he had received and signed an arbitration agreement.

To show the electronic acknowledgment was “the act” of the employee , the employer presented evidence that all employees logged onto the human resources system with a unique login name and password to review and sign. But the Court of Appeal found the employer’s evidence insufficient to show the electronic signature was the employee’s. Specifically, the employer failed to show: the signature could only have been placed on the document by the employee, when the signature was made, and only the employee could access the system with his unique user name and password and not otherwise.

The employer adduced sufficient evidence that the electronic signature was attributable to the employee in Espejo v. Southern California Permanente Medical Group. Espejo, a physician for Southern California Permanente Medical Group, challenged his electronic signature on an arbitration agreement, saying he did not recall signing the document. The employer presented evidence that Espejo had used a unique user name and password to log into the system, and the system then required Espejo to create his own password to access the document, which only Espejo knew. The employer also showed the system stamped the document with the exact date and time of his electronic signature, and the document included the “IP” or internet provider address from which Espejo had signed the agreement. Based on this evidence, the court concluded the electronic signature on the arbitration agreement was properly attributable to Espejo, and therefore the requirement to arbitrate the underlying claims enforceable.

Employer Takeaways

Electronic signatures and electronic records generally can result in cost savings, easier record retention, and document management. However, without valid, enforceable electronic signatures, they may not be worth the electrons they’re written on, if you will.

Employers can take proactive measures to improve the chances that electronic signatures will be enforced in the event of litigation. First, employees should separately agree to receive and sign documents electronically. Second, before providing access to the documents electronically, employers may require the employee to access the system using a unique user name and password that the employee creates and only the employee knows, and to change the default password assigned by the system. The electronically signed documents should contain information that attributes the signature to the particular employee, such as a date and time stamp, the IP address and other record of the system proving the particular employee had logged in.

Employers should retain the electronic records of the employee’s “sign up” for the electronic records. The sign-up process should including the employee’s ability to print the documents, and copies should be sent to the employee’s personal and, if applicable, business email accounts. Copies of those emails should be stored in case it is necessary to prove the employee signed up.
Finally, in the event the signature is challenged, employers must ensure there is an employee or vendor who will be able to demonstrate under oath the steps taken to ensure that the signature on the document is indeed the employee’s, and that the employee agreed to proceed with the transaction electronically.