Back in the decades before information technology marginalized hard-copy HR documents, paperwork containing employee signatures and staff sign-offs continually expanded—think of job applications; offer letters; tax/social security and immigration forms; employment agreements and amendments; restrictive covenants; invention assignments, non-disclosure agreements; benefit-plan enrollments; time cards; safety logs; training attendance logs; job change notices; expatriate/secondment assignment agreements; performance reviews; equity/compensation plan enrollments and grants; expense reimbursement forms; acknowledgements of handbooks, codes of conducts, work rulesand whistleblower hotlines; data privacy consents; severance releases—and many others.
Now, of course, multinationals strive to avoid generating, archiving and retrieving paper HR documents, which are so cumbersome to track across borders. As organizations migrate to electronic recordkeeping and virtual HR documents that exist only on intranet servers or in the cloud, hard-copy HR paperwork—even documentation bearing staff signatures—is in steep decline. Paper HR documentation becomes increasingly superfluous as employers adopt high-tech HR information systems from vendors like SAP, Citrix, Workday, Ultimate Software/UltiPro and Oracle/PeopleSoft, and as employers start using specialty paperless HR providers like PeopleDoc (which calls itself "the number one global digital HR solution company").
In addition, of course, the "paperless office" is also an environmental issue—"green" employers save trees.
Not surprisingly, a new-hire these days has less and less need for a pen when onboarding and signing onto routine HR documentation. It is so much easier just to have staff click "I agree" on online tools and intranet forms and to confirm agreements and acknowledgements by email or text message. For that matter, many of the HR documents that still originate on paper now get imaged and stored electronically, just as libraries microfilmed periodicals. But we need to tap the brakes here. Technology changes quickly while laws evolve slowly. High-technology paperless HR documentation systems are pulling out ahead of slowly evolving legal doctrines. As technology, internationalization and environmentalism marginalize paper HR documentation and physical signatures from ahuman resources process point of view, centuries of ossified jurisprudence around the world remain embedded in old-school document execution and authentication formalities—paper originals, wet-ink signatures, signing witnesses, notarizations, even (in some countries) government stamps and seals.
It has been said that "[d]ecades after computers took over the office environment, the paperless human resources department remains an enticing goal, but those who pursue it incautiously may come to regret their haste." (Bloomberg BNA Privacy & Security Law Report, vol. 12 no. 45, "Special Report," Nov. 18, 2013) The challenge is that in most every country, legal doctrines predating the Internet remain stubbornly relevant in deciding questions of the enforceability of electronic employee signatures, assents, acknowledgements and verifications. (Most legal issues around document enforceability in the "paperless office" implicate signedpaperwork—duly issued electronic business records that do not bear any signatures can always simply be printed out.)
Imagine a hypothetical boss, in any country, who just fired two employees for violating the organization’s code of conduct. Imagine both employees deny ever having seen the code, and their disputes end up in a local court. Employee #1, hired first, had signed a hard-copy code of conduct acknowledgement in wet ink agreeing to abide by the code, which the employer duly filed away for safekeeping. Employee #2, hired later, must have at some point clicked "I agree" to an electronic code of conduct acknowledgement—the organization’s Information Technology department insists that all employees who onboarded since before employee #2’s hire date have had to click past a code of conduct acknowledgement screen to sign onto the company intranet system. We do not need a formal legal opinion from the country at issue to understand why this employer will have a far stronger case holding employee #1 to his code of conduct acknowledgement as compared to employee #2.
And yet legal systems around the world are opening up to workplace-context electronic assents and acknowledgements. Law may change slowly, but it does change. Beginning in the 1990s, governments have been passing formal electronic signature authorization laws like the US E-SIGN (Electronic Signatures in Global and National Commerce) Act, European Union directive 1999/93/EC (which is expected to be replaced in July 2016), Singapore’s Electronic Transactions Act 2011, South Africa’s Electronic Communications and Transactions Act 2002, and Mexico’s Law of Advanced Electronic Signature 2012. Now courts in many countries are getting acquainted not only with email but even with the various types of electronic signatures including digital signatures (asymmetric cryptography/private computer keystrokes), manual signature-capture devices (tablet/stylus and finger-signature pads), identity verification services (email validation)—even biometric signatures (fingerprints, retina scans).
Yet these formal statutory electronic signature protocol laws— which in Europe, Mexico and elsewhere are called "advanced" electronic signatures laws—are not always viable or practical in the human resources context. In fact, many of the authorizing statutes that allow "advanced" electronic signatures do not address or contemplate the workplace context. And so only a minority of real-world assents and acknowledgements in the workplace meet the strictures of formal electronic signature authorizing statutes. Even an employer that may go to the trouble to have its staff execute "advanced" electronic signatures on overtly contractual documents like employment agreements, invention assignments and stock option award grants is much less likely to use formal electronic signature protocols when collecting electronic sign-offs on routine workplace documents like time cards, expense reimbursement submissions, performance evaluations and acknowledgements of conduct codes and work rules.
Multinational HR groups want to know: How can we efficiently collect binding electronic employee assents and acknowledgements across borders, and maintain enforceable employee-facing electronic records? The answer breaks into two sub-issues: Enforceability of formal statutory ("advanced") employee electronic signatures versus enforceability of informal employee electronic assents, acknowledgements and HR records. And then there are several additional issues, as well.
Formal statutory ("advanced") employee electronic signatures
The US E-SIGN Act, European Union directive 1999/93/EC, Singapore’s Electronic Transactions Act 2011, South Africa’s Electronic Communications and Transactions Act 2002, Mexico’s Law of Advanced Electronic Signature 2012 and formal or "advanced" electronic signature statutes across many other jurisdictions authorize verifiable electronic signature protocols. Therefore, whether a given employee’s electronic signature complies as an authorized "electronic signature" depends on whether it meets the local authorizing law in the country at issue. Electronic signature law compliance is inherently local.
As to what these electronic signature-authorizing laws mean in the workplace, we might look at Mexico as an example. Electronic signature law in Mexico evolved erratically by case law over a number of years. The status of Mexican electronic signatures used to be uncertain, subject to the reasoning of whatever Mexican judge decided a dispute over an electronic document execution. Then in 2012, Mexico consolidated its electronic signature case law into its Law of Advance Electronic Signature 2012, setting out specific protocols for what Mexico will enforce as an electronic signature equivalent to wet ink. Unfortunately, though, Mexico’s 2012 statute seems to presume negotiable instruments or bilateral contracts—this law does not expressly address workplacecontext employee assents. And so Mexico’s 2012 law may not revolutionize electronic assents in the Mexican workplace; relatively few employee assents or acknowledgements in Mexico are likely to meet the law’s strictures.
While only a minority of employee assents and acknowledgments in day-to-day human resources likely qualify as "advanced" electronic signatures consistent with local authorizing protocols, some HR teams sometimes do cross their t’s, dot their i’s and get their staff to execute compliant electronic signatures conforming to local "advanced" electronic signature laws, as if they were executing negotiable instruments. Usually HR teams go to this trouble only with overtly contractual documents like employment contracts, invention assignments and equity/stock option grants. (Worldwide, most employers still execute most severance releases with wet ink.)
Theoretically, electronic affirmations that comply with authorizing laws replace wet-ink signatures in every respect. For example, in the recent case Woods v. Victor Marketing Co., a US federal court upheld without question an employment agreement that had been executed electronically using DocuSign (U.S. N.D. Cal. 8/28/14). Courts around the world might be expected similarly to uphold "advanced" electronic employee signatures, just as those courts would enforce compliant formal electronic signatures in the commercial and negotiable instrument contexts. But this said, "electronic signatures are easier to forge and harder to authenticate than handwritten signatures." (SHRM Legal & Regulatory Report: What Is an Electronic Signature and How Is It Used by HR Professionals?, 6/1/2011) As a practical matter, a wet-ink-signed paper document usually amounts to the best proof of all.
As the Woods case shows, compliance with formal electronic signature statutes often gets outsourced to qualified third-party providers like DocuSign, which claims to be "the global standard for digital transaction management." But again, in practice employers seem to turn to DocuSign-type systems mostly for overtly contractual employee-executed documents. Indeed, the "Human Resources" page on DocuSign’s own website emphasizes that value of the company’s electronic signatures on "I-9 verifications," "NDAs," "separation agreements" and only a few other formal HR documents—it says nothing about staff expense reimbursements, performance evaluations, time cards, safety logs, training attendance logs or dozens of other, less formal employee-attested documents.
A basic but confounding challenge with electronic assents in the workplace is semantics. HR professionals who talk about employee electronic assents, acknowledgements and verifications tend to use the term "electronic signatures" loosely, confusingly and imprecisely. Strictly speaking, only a small subset of electronic employee assents and acknowledgments qualify as "advanced" or formal statutory electronic signatures compliant with local authorizing statutes like US E-SIGN, EU directive 1999/93, the 2011 Singapore law, the 2002 South Africa law and the 2012 Mexico law. HR teams confuse things when they use the phrase "electronic signature" colloquially to include both formal, compliant electronic signatures and also informal electronic employee assents that might better be called "intranet affirmations," "online click acknowledgements," "email confirmations" or "informal employee electronic assents."
Informal employee electronic assents
The more common and more difficult enforceability challenge as to electronic employee affirmations internationally is the problem of informal electronic employee assents that fall short of formal "advanced" electronic signatures. Multinationals in their day-to-day employment operations often sidestep formal electronic signature authorizing protocols and take shortcuts, collecting informal electronic assents and using electronic recordkeeping tools like "I agree" mouse clicks, intranet forms, emails and text messages. Every day countless employees around the world informally assent to many routine workplace documents, particularly less overtly contractual ones like payroll registrations, benefits enrollments, time cards, shift requests, policy/code/handbook acknowledgements, changes in position/compensation, job reassignments, expense reimbursement requests, performance evaluations and expatriate assignments—but sometimes even employment contracts, invention assignments, restrictive covenants and other overtly contractual documents.
Employers want to know whether these informal employee electronic assents (again, often confusingly and colloquially called "electronic signatures") are binding. This is tough to answer because by definition informal electronic assents fall short of the strictures in "advanced" electronic signature authorizing statutes. In a sense, we are asking about the enforceability of something that is inherently non-compliant. If an assent is non-compliant, can it ever be binding?
Sometimes it can. The analysis is subject to arguments and depends on facts and circumstances. Whether an informal HRcontext electronic assent binds the employee who (purportedly) made it depends on variables including the issue assented to, the extent to which the employee later challenges or denies his own assent, the in-house IT staff’s capacity to prove the assent and the rules of evidence in the forum that would decide a dispute. An employer that cannot tolerate this ambiguity and needs an ironclad enforceability guarantee should either have its staff execute their acknowledgements with wet ink on paper or else comply with the strictures of local "advanced" electronic-signature authorizing statutes.
- Example. As an example of the strategic trade-offs inherent here, think of routine employee expense reimbursement forms. These are so ubiquitous in day-to-day HR that employers have a keen need that expense reimbursement requests be submitted expeditiously and hence (often) informally and electronically, such as with "I agree" computer clicks online, or emails. Fortunately, informal electronic assents on reimbursement requests rarely cause problems. But what if one day a boss catches an employee cheating on an expense reimbursement? That boss will then have to hold the employee to his online click or email. What if that employee denies having affirmed the fraudulent expense submission, claiming it was a mere draft, or was submitted accidentally, or blames his secretary? Better proof would have been to collect the employee’s wet-ink signature on each expense reimbursement form, or at least to have collected formal electronic signatures that comply with the local authorizing statute. Yet the convenience of using online forms for routine reimbursement requests may outweigh the risk of losing a hypothetical future dispute over a fraudulent expense submission.
And so each employer must make strategic choices. An employer that needs the practicality and efficiency of informal electronic employee assents—and that is willing to tolerate some ambiguity as to enforceability—can take comfort in the fact that most informal electronic workplace assents end up being good enough for their intended purposes. Only a tiny fraction later get challenged and litigated in court. On the other hand, the "acid test" of any informal employee electronic assent is whether it would be admissible, persuasive evidence in a local court. An electronic workplace assent that local courts will not enforce is worthless as soon as some employee denies or challenges it.
When strategizing in this context, consider what would happen if some employee executes an informal electronic consent that, later, the employer needs to hold him to—but then the employee denies having executed it. If this dispute lands in a local court, how will the employer prove the assent? Even if the assent might be admissible, surely it will be weaker evidence than a wet-ink signature on paper. For example, in the recent Canadian case Free v. Municipality of Magnetawan (2014 ONSC 3635, 9/8/14), the Ontario Superior Court of Justice held that a would-be email employment contract (which may have been tampered with) did not amount to a binding employment contract. (In that case it was the would-be employee who tried to hold the would-be employer to the alleged email employment contract.)
In short, this comes down to risk tolerance. Choosing informal employee electronic assents over both wet-ink-on-paper signatures and "advanced" statutory electronic signatures always poses at least some risk of non-enforceability. The risk gets bigger where the HR document is more overtly contractual. The risk is less, and more manageable, for routine HR acknowledgements. The best way to make employee assents enforceable is to get wet-ink signatures (ideally with a signing witness). The secondbest way is to get formal electronic signatures that comply with the local electronic signature authorizing law. The worst option is informal electronic assents. So use informal electronic assents only where their practicality and efficiency outweigh their (dubious) enforceability. Overtly contractual workplace HR documents may cry out for formal execution—employment agreements, invention assignments, stock awards, restrictive covenants and severance releases, for example. But informal employee electronic assents often make sense for routine HR documents—training attendance logs, shift-change notices, expense reimbursement requests, vacation requests, performance evaluations and the like. This means that a multinational’s optimal strategy for how to get an employee electronically to execute a binding payroll form or time card may differ from its ideal strategy for getting that same employee electronically to acknowledge a handbook or code of conduct; that, in turn, may differ from the organization’s preferred strategy for electronically enrolling staff in a new benefits plan, which may differ from its best strategy for granting employee stock options or for getting an employee to execute an amendment to an employment agreement—or for getting an expatriate to execute a secondment agreement, or for getting a fired employee to execute a severance release. In each situation where an employer needs a staff sign-off, think through how an electronic acknowledgement will look if some employee later sues and holds management to its burden to prove he assented. Ask: How likely is a dispute over this electronic acknowledgement to go to litigation? How difficult will it be, later, for our IT team to prove this employee really did electronically agree to this assent years ago? How receptive—or hostile—are this jurisdiction’s rules for admitting and weighing evidence of an electronic assent, especially one that is less than an "advanced" electronic signature?
Having distinguished statutory electronic signatures in the HR context from informal employee electronic assents and acknowledgements, several other issues play into a multinational’s electronic employee recordkeeping across borders.
- Archiving and proof problems: A vital part of electronic HR assents and recordkeeping that transcends legal analysis is the always-tricky matter of electronic archiving. A lawyer in any jurisdiction advising on the viability of employee electronic assents in some HR context or other will inevitably assume that the client, years later, is going to be able to retrieve a given employee’s electronic assent and demonstrate that, at whatever moment in the past, that employee really did electronically agree. But in fact meeting the employer’s burden to prove that years ago an employee clicked some box on his computer or signed with a finger or stylus, or sent an email or text message, can be surprisingly difficult. Where the employee will not stipulate to his electronic assent—and sometimes even where he will—the employer needs sufficiently rigorous electronic archiving and retrieval practices to be able to prove the authenticity of electronic records. Beware if the best proof the IT team will be able to muster is generic and systemic, along the lines of: This employee must have agreed—otherwise he would never have been able to log onto his computer and click through to the next screen. This explanation may not amount to conclusive proof in a court of law because it is mere evidence of system operation, not evidence of an actual employee execution of a specific document on a given date. Similarly, proving an employee agreed to something by email may be impossible years later, especially if the email system routinely purges old correspondence or if the parties to the email deleted it and cleaned out their "trash" files. And old text messages are never easy to retrieve and prove. Before embarking on any cross-border initiative to collect employee assents or acknowledgements (electronic or on paper), first work up a rigorous archiving practice that ensures assents and signatures will be readily retrievable and provable years later.
- Electronic imaging of wet-ink-signed documents: We have been considering employees electronically assenting to HR documents in the first instance. A separate issue is electronic/ pdf imaging of wet-ink-signed paper documents—retaining the electronic image and destroying or losing the original. (Obviously there is no electronic proof problem where an employer images a wet-ink-signed document and also retains the paper original as backup.) When a dispute over a signed document may be headed to court but only a pdf image of the document exists, the best the employer will be able to do is print up the imaged document and produce the print-up. As with electronic assents, the "acid test" of enforceability is the question of admissibility in court and weight of the evidence. This issue will be fairly straightforward in the United States and certain other common law jurisdictions where the so-called "best evidence rule" should admit a printed pdf, if the original was destroyed and the pdf is the best extant evidence. But under the "best evidence rule," where an HR document was executed in counterparts and the employee’s original is available, the employee’s version likely controls, absent evidence of tampering or forgery. The "best evidence rule" is a common law doctrine. Civil law countries more rigorously emphasize document formalities; expect them to be significantly stricter, often requiring original hard copies. Expect civil law courts to hold employers to their burden to authenticate documents claimed to have been duly executed. Plus, in these countries employees are less likely to stipulate to or concede document authenticity.
- Government filings at agencies: Some jurisdictions require that certain employee-signed HR documents get executed at or filed with government agencies. For example, employers in Guatemala must file employment agreements with Guatemala’s General Directorate of Labor within 15 days of execution, and binding employment releases in Mexico must get executed before a Mexican labor agency. Obviously these documents will have to be signed with wet ink on paper until the local agencies start accepting electronic filings. That said, though, the "paperless office" trend is for the employer to file the paper original with the agency, retaining only an electronic image in employer archives.
- Document execution and retention laws: Some jurisdictions impose laws that require written employment contracts. (See our Global HR Hot Topic of January 2014) Otherwise, though, laws outside the United States tend not to force employers to draft and retain many specific HR documents. But such laws do exist. For example, the UAE requires that employers with five or more staff maintain personnel files (Federal Law no. 8 of 1980, art. 53) and also requires that employers with 15 or more staff maintain a "remuneration register" (UAE Labour Law art. 54). Tax laws also tend to require retaining some HR documents. A best practice here is usually to maintain statutorily mandated documents in hard copy—but of course, electronic versions can always be printed up on paper later, when needed. The legal issue therefore becomes statutorily mandated documents (like employment contracts) that contain signatures. Be sure to archive statutorily mandated documents bearing signatures in some way that complies with local document-mandating statutes and retention laws.
- Data protection law compliance: Jurisdictions from Europe to Argentina, Canada, Hong Kong, Israel, Mexico, the Philippines, Uruguay and beyond (but not the United States, Brazil, China, India or many others) impose tough omnibus data protection laws that, among other sweeping ramifications, require employers to confine access to HR records about individual employees, preventing access by anyone without a business need. These omnibus data protection laws usually reach both electronic and paper records, signed or not signed, that identify individuals; to that extent, these laws are not specific to employee-executed documents, but they reach workplace documents (except in Australia). For our purposes, the point is that while electronic documents containing employee signatures and assents must comply with applicable data protection laws, nothing about the electronic assents per se changes the data law compliance analysis. This said, electronic HR data storage can be more susceptible to data breaches. As one example, some "cloud storage" systems allow data mining and are notoriously susceptible to breaches. Be sure that documents identifying employees, whether employee-executed or not, get archived in ways that comply with local data protection laws. Ensure good confidentiality and data security practices. Comply with restrictions on data exports.