As even the most tech-resistant workplaces continue to shift online through remote work, the handwritten signature becomes more and more difficult to obtain. The ability to sign documents electronically increases efficiency by eliminating the need for a physical presence or handoff of a document; simply click a button or type your name, then send it off via email.
However, like many technologies replacing age-old business practices, your company may find itself facing questions about electronic signatures from clients or employees. Are they legal? Secure? And what exactly counts as a “signature”?
Electronic signatures (or “e-signatures”) are fast, secure, and almost universally recognized as a legitimate form of signature for most documents. That being said, let’s review the definitions of e-signatures according to major legislative acts passed in the US, state exceptions, and recommended criteria to ensure secure authentication.
E-signatures vs. Digital signatures
Although the terms may look the same and are often used interchangeably, e-signatures and digital signatures are different. E-signature refers to any electronic process that indicates an individual’s acceptance. Authentication of the signer may include a PIN number, SMS text code, or email confirmation. E-signatures are generally considered a broad category of signing methods, covering most processes in the US.
A digital signature uses a digital certificate from a trust service provider to authenticate the identity of the signer. When the signature is finalized, the signature is bound to the document via encryption. Some states prefer digital signatures specifically and category them as more secure. Think of digital signatures as a type of e-signature that uses specific technology to achieve authentication, and ensure the terms aren’t used interchangeably in any of your documents.
Kin uses digital signatures for document signing on the platform.
The ESIGN Act
E-signatures are generally considered valid in the U.S (including digital signatures) thanks to the Electronic Signatures in Global and National Commerce Act (or, ESIGN). The ESIGN Act allows e-signatures to be legally admissible in court and serve as satisfaction for any act that may require a signature
The ESIGN Act is legal in the United States wherever federal law applies (we’ll discuss what happens when federal law does not apply later). It does not apply to wills, testaments, trusts, birth/marriage/death certificates, or codicils.
E-signatures must meet a few criteria under the act to be considered legally binding:
Signers must clearly demonstrate intent to sign electronically, whether by typing their name, clicking ‘accept’, or drawing a signature on a screen. All boxes and buttons should be clearly labeled.
Signers must consent to doing business electronically. Provide a brief consent clause that users must accept to continue.
If a user cannot provide an electronic signature for whatever reason, an opt-out clause should be provided that clearly outlines steps the user should take to sign the document manually.
Copy storage and access
All signers should receive a copy of the signed document, and the ability to reproduce copies as needed should be available.
UETA and Exceptions by State
In areas where federal law may not apply, the Uniform Electronic Transactions Act provides the framework for the legality of electronic signatures. This act has been accepted in 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands**. New York and Illinois are the exceptions, operating by their own regulations – we’ve outlined them below.
The UETA allows e-signatures to satisfy any signature requirement on a document with the exception of wills, codicils, testamentary trusts, and birth, wedding, and death certificates. Contracts, records, and signatures cannot be denied due to an electronic form.
The UETA’s definitions and criteria regarding secure electronic signatures are in agreement with those outlined by ESIGN.
Illinois designates certain e-signatures as preferable to others based on security. Digital signatures are defined as secure e-signatures if they are created using an asymmetric algorithm certified by the Illinois secretary of state AND created using a valid certificate issued by a certificate authority that meets the secretary of state’s standards.
Signatures that meet these requirements are considered the most secure by Illinois and are favored by the state.
Like Illinois, New York has chosen to operate by its own definitions and statutes. The state recognizes the legal validity of all electronic signatures while also introducing the role of an “electronic facilitator” in the state IT department. This facilitator oversees technologies used to improve government best-practices (such as e-signing), and also implements a best practices guide to assist with the implementation of e-signature methods.
Similar to other states, New York accepts e-signatures as valid with a few exceptions. E-signatures are not accepted on documents that instruct on the disposition of a person or property upon death (i.e., a will, trust, or power of attorney).
Some states have updated or adapted UETA in their state as new technology emerges (i.e., blockchain). It’s recommended you review your own state’s specific and current amendments* to ensure you are in compliance.
E-signatures are an almost universally accepted method of authenticating documents in the states, although laws may differ based on the state and federal jurisdiction.
Kin makes it easy to sign and complete paperwork natively with our integrated digital signature system. Learn more or reach out to learn how we can help streamline your workflow!
*Note that the laws surrounding e-signatures are continually changing. This article is not meant to replace professional legal counsel.