E-Signature Legal Requirements: How to Stay Compliant
Managing paperwork — especially signed documents — got significantly easier and faster with the advent of the electronic signature. For more straightforward and efficient processes, many companies use electronic forms in lieu of paper documents to collect consent and approval.
Electronic signatures are as legally binding as handwritten signatures, but before creating workflows that substitute digital signatures for wet signatures (ink signatures), make sure you understand your legal signature requirements.
Keep reading to find out how to stay compliant with e-signature laws.
The Legal Acts Guiding Electronic Signature Acceptance
Signed into law on June 30, 2000, the Electronic Signatures in Global and National Commerce Act (ESIGN or E-Sign Act) granted legal status to electronic signatures and records in the United States when all contract parties agree to use electronic documents and to sign them electronically.
The Uniform Electronic Transactions Act (UETA), the precursor to ESIGN, provides the legal framework for state laws to include electronic signatures. In June 2021, Illinois became the 49th state to adopt UETA. New York is the only state that has not adopted the law, although it has a similar one making electronic signatures legally enforceable.
In the UK and the European Union, legally binding electronic signatures are regulated by the Electronic Signatures Regulations and the Community framework for electronic signatures, respectively.
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When a Handwritten Signature is Required
There are still conditions where electronic signatures are not allowed under U.S. federal law. The following is a partial list of documents requiring traditional wet signatures and, often, notary public to serve as a witness. (See the E-Sign Act for the complete list.)
- Court orders and notices
- Adoption, marriage, divorce, and other matters of family law
- Termination of life or health insurance benefits
- Creation and execution of wills, codicils, or testamentary trusts
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There are two types of electronic signatures: standard electronic signatures and digital signatures. In legal terms, an electronic signature can be an electronic sound, electronic symbol, or process attached to an electronic record with the intent to sign that record.
You can sign your name electronically by typing your name, uploading an image of your signature, checking the intent box, or using your finger or a stylus on a mobile device.
Standard e-signatures are often used on sales contracts and customer invoices. The standard e-signature does not use authentication to verify the signer’s identity.
Public key infrastructure (PKI) is the primary technology used for digital signatures, legally binding digitally signed email messages and documents. The technology exchanges software keys to ensure the transferred information is secure and that the person’s identity is correct.
Look for a signature software solution that supports business workflows and lets you capture e-signatures and consent and maintains authenticity and legality. Software options include Adobe Sign, HelloSign, Zoho Sign and DocuSign.
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Best Practices for Compliance
Most business processes and transactions require a signature. Whether you are offboarding an employee, approving an invoice, or finalizing a lease, chances are both parties signed the documents with an e-signature. Follow these best practices for legal enforceability.
- Ensure the signers have access to a signed copy of the document by download or email.
- Maintain an audit trail that includes user authentications, IP addresses, and timestamps. Most e-signature software options create an audit trail.
- Maintain your electronic records on a safe, secure cloud storage system.
- Allow an option for a signer to sign with an ink signature.
Meet the Legal Requirements for your Business Documents
Use the above information to ensure you follow the proper requirements for gathering signatures for your documents. Contact your legal counsel for questions and clarifications.
Let Sonary help you find the right signature software for all of your HR, sales, and financial needs. We compare different software solutions and give in-depth reviews to give you the information to choose the best solution.
