Myth: An employment contract must be physically signed on paper by both sides or it isn’t enforceable or admissible as evidence in a wrongful dismissal or any other court case.
Truth: A digital signature is just as valid as a physical signature, as long as you meet the applicable legal requirements.
The Law of Electronic Signatures & Contracting
Every jurisdiction has adopted e-commerce legislation allowing parties to a transaction to create a legally binding contract via e-signature.
|E-Signature Laws of Each Jurisdiction|
|• Federal: Personal Information Protection and Electronic Documents Act (PIPEDA)
• Alberta: Electronic Transactions Act
• BC: Electronic Transactions Act
• Manitoba: Electronic Commerce & Information Act
• New Brunswick: Electronic Transactions Act
• Newfoundland: Electronic Commerce Act
• Nova Scotia: Electronic Commerce Act
• Ontario: Electronic Commerce Act
• Prince Edward Island: Electronic Commerce Act
• Québec: Legal Framework for Information Technology, an act to Establish
• Saskatchewan: The Electronic Information & Documents Act
• Northwest Territories: Electronic Transactions Act
• Nunavut: Electronic Commerce Act
• Yukon: Electronic Commerce Act
These laws apply to employment contracts with one significant exception: In Alberta, the e-commerce law doesn’t apply to “any information or records arising from, related to or connected with an employee employer relationship,” including an employment contract [Electronic Transactions Act Regs., Sec. 2(2)(a)].
The 4 E-Signature Requirements
Recognizing that employees can sign their contracts electronically is just half the battle. HR directors also need to know how to properly execute contracts via e-signature so they can select technology with the necessary capabilities. Although some provincial standards may be a bit less stringent, experts recommend basing your system on the 4 basic requirements for e-signatures under federal PIPEDA rules:
1. Signature Must Be Unique & Distinctive
An e-signature doesn’t necessarily have to look like a handwritten signature, but it does have to be 100% unique to the person who signs with it. This requires using a system where all user credentials or identities are unique.
2. Must Be Created Under Signer’s Sole Control
The e-signature must be created using means that signers can maintain under their sole control. Potential methods:
- Knowledge-based authentication via third-party databases or personal information;
- Shared secret data like user ID/PIN, links from an authenticated email or secret question challenge;
- One-time passcode devices, including using SMS on mobile phones;
- Capturing a handwritten signature on a mobile device; and
- Use of digital certificates on smartcards and mobile phones.
3. E-Signature Must Be Able to Recognize Signer’s Identity
The method used for e-signing must be capable of identifying and recognizing the identity of the person who signs electronically.
4. Must Be Protected via Change Detection Technology
You also need to secure e-signatures via digital signature technology capable of detecting and recording subsequent changes or tampering. The digital signature process should create a “hash,” i.e., an encrypted digital fingerprint of the document that can be used later to verify the integrity of the electronic record.
8 E-Signature Best Practices
Embed all e-signature data and audit trails directly within the document rather than storing it separately in the cloud or a proprietary database, recommends a report created jointly by the law firm Stikeman Elliott, LLP and e-signature software developer Silanis Technology. In addition to being more secure, embedding data within the document enables you to verify its authenticity independently of the software, which may be important if the vendor goes out of business. Other recommended best practices for the e-signature solution listed in the report:
- Place an e-signature block at the location where the signature was applied;
- Link the audit trail which you’ve embedded in the document to each signature;
- Secure the document and each signature with a digital signature;
- Include the date and time of each signature in the audit trail;
- Provide the ability to verify the validity of the signed record offline, without going to a website;
- Provide one-click signature and document verification; and
- Provide the ability to download a verifiable copy of the signed record with the audit trail.
Source: Electronic Signatures in Canadian Law, by Chris Lofft, Research Lawyer, Stikeman Elliott LLP, and
Michael Laurie, Silanis co-founder and 25-year veteran of e-signatures, Nov. 2014