Are Electronic Signatures Valid for Employment Related Agreements?

In our ever increasing digital age, it should come as no surprise that employers are frequently turning to the use of electronic signatures.  But will they hold up in court? Developing case law suggests yes but there are additional hurdles employers must be aware of with electronic signatures.

The “I Never Electronically Signed Anything” Defense 

What happens if you have an employee electronically sign an employment-related agreement such as an arbitration agreement or restrictive covenant, but he later denies doing so?  The burden of proof will rest with the employer to prove the electronic signature is actually that of the employee at issue.  Merely submitting a “true and correct” copy of the electronic signature will unlikely suffice.  Courts instead may require detailed proof showing that:

  • the employee was given a private and unique username and password;
  • there are security and privacy protections associated with the link of the document at issue with the username and password;
  • the employee must engage in certain electronic steps in order to place his name on the document; and
  • there are procedures demonstrating that the employee’s name could only have been placed on the signature pages of the document using that employee’s unique username and password.

The “I Only Checked a Box But Never Actually Agreed to the Document” Defense

What happens if the employee agrees he signed or electronically checked a box, but argues there was nothing stating he actually agreed to the document?  The Third Circuit Court of Appeals recently addressed this argument in two companion cases, ADP v. Halpin and ADP v. Lynch (Feb. 2017).   In order to accept an award of stock in ADP, two employees checked a box on the company website indicating that they had “read all associated documents” – including a non-compete agreement.   The employees argued that while they electronically checked the box, there was no mutual assent to the non-competition agreement because they were not required to specifically acknowledge that they had agreed to the non-competition agreement. The Third Circuit rejected this rationale, and concluded that there was a sufficient showing of assent because the employees checked a box indicating that they had “read” the terms and conditions of the stock award, and the stock award documents explicitly advised that the non-competition agreement was a condition of accepting the stock award.

Bottom Line

Courts will recognize electronic signatures, but make sure you can actually proof that the signature belongs to the employee at issue.  And while it may be sufficient to have employees just electronically check a box stating they have read the terms and conditions of an attached document, the  better practice is to specifically include language in that box stating that the employee has both read and agreed to the agreements at issue.