Although employees can expect to sign many documents (including revised policies and updated tax forms) throughout their term of employment, they sign more forms during onboarding than at any other time. These forms define, to a large extent, the legal relationship between the employer and the employee. This is true even in situations where employment is “at will” and there is no formal contract. Employers take this opportunity to define expectations, rules, and the consequences for breaking those rules. In addition, employees are expected to accurately complete and sign various forms required by federal and state agencies (under warning of perjury prosecution).

E-Sign Designed to Replace Pen & Paper Signatures

Since 2000, the government has recognized electronically collected signatures as legally binding. However (as usual), there is a lot of fine print in the actual e-Sign Act that must be followed to the letter. Otherwise, the signature may be viewed as lacking in authenticity. For example, the process used to collect the signature must be set up to reasonably ensure that the individual signing electronically is actually the person whose name appears as the signing party. The signatory must be given the ability to review and retain a copy of the signed document for his/her records. Also, there are business recordkeeping and storage requirements for all electronically signed forms that must be followed.

What’s the Risk of Failing to Comply?

In the event of an audit by a government agency, investigators may look not only at an employer’s records but also at the process by which they were obtained. Let’s say your organization is already in hot water with the IRS for tax withholding errors. You don’t want them telling you that all your W4 forms are invalid too because your company isn’t complying with e-Sign regulations. It’s always best to take steps to ensure your organization is making an educated, good faith effort to comply.

Then there’s the matter of litigation. If your workers have signed a non-compete or confidentiality agreement that isn’t valid, you may have no recourse if they violate the policy. E-discovery by the defense may uncover the fact that the policy acknowledgement signed by an employee is not binding because the signature was not properly collected. This doesn’t just have the potential to impact the outcome of a case against one worker. Suppose your competitors and your organization’s former employees find out that your employment agreements are not valid? That would open up a Pandora’s box of costly exposure for your company.

Emerald Software Leads the Industry    

We’ve fully examined every aspect of the e-Sign Act as it applies to the collection of signatures during onboarding. Unlike onboarding products from other vendors, there aren’t any gaps in our application of these rules. The rest of the HR software industry may eventually catch up – after a few employers have been the subject of high profile disasters from inadequate e-Sign compliance. You don’t have to wait. Implement Universal Onboarding with electronic signature collection to ensure your paperless agreements are really legal.

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