An electronic signature or "e-signature" is an electronic sound, symbol or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. It includes digital signatures, electronic or "Smart" cards, digital pens, fingerprint identifiers, and encryption. Examples of e-signatures include a personal password, a PIN code, a facsimile signature, a digitized signature, an email signature, or the click of an "I Agree" button.

With e-signatures, the goal is to provide a way for the recipient of electronic information to:

• Know the identity of the sender of the electronic information;
• Determine if the information was altered or modified during transmission; and
• Verify the electronic information received was what the sender actually sent.

New legislation in the United States, the United Kingdom and Canada has legitimized electronic contracts and paperwork, making it more attractive for businesses to conduct transactions in a paper-free, digital environment. The Electronic Signatures in Global and National Commerce Act (ESIGA), the so-called eSign bill was signed into law in the U.S. in June 2000 and came into effect Oct. 1, 2000.

Under the eSign Act, contracts will not be unenforceable "solely because electronic signature or electronic record was used in its formation." Nevertheless, under the Act, a number of disclosures must be made before a contract created electronically is binding:

1. That she/he had the right to perform the transaction in a "non-electronic form" and has the right to withdraw from the electronic form without any fees or other consequences;
2. the process for withdrawing consent;
3. whether the consent to use the electronic signature applies to only that particular transaction or to other transactions as well; and
4. how to request a paper copy of the electronic record and any fee that might apply.

What's driving the development of these technologies is environmental awareness combined with business need -- paper is slow. Printing and delivery of paper, whether a report, invoice or purchase order, is a labor and equipment intensive process that can take minutes, hours or days. Digital "paper" can be delivered almost instantly via the Internet, potentially saving companies billions of dollars.

ESIGA does not apply to transactions that govern wills, trusts, codicles, testamentary trusts, family law, and with limited exceptions the Uniform Commercial Code. Neither are documents related to court proceedings such as pleadings and briefs covered by ESIGA.

Several exceptions are designed to specifically apply to routine consumer transactions. Termination of utility services and foreclosure notices for a primary residence of an individual cannot be performed electronically. Unfortunately ESIGA fails to define "primary residence" any further. Likewise, termination of life insurance coverage or health insurance benefits cannot be performed electronically. However, termination of annuities can be performed electronically. The business of insurance and activity of insurance agents and brokers is otherwise explicitly identified as being covered by this act. Finally, notice of product withdrawal or recall cannot be performed electronically, but this is the only case if the product "risks endangering health or safety."

Employers have the opportunity to dramatically reduce the amount of paper in their HR Departments as a result of the eSign Act. As an example, contracts between employers and vendors, such as independent contractors and temporary help agencies, can be entered via computer. In addition, employers now have additional legal support for maintaining training documents, acknowledgement forms for policies and procedures, disciplinary warnings, and other personnel documents signed by employees in electronic format. Prior to implementing a "paperless" human resources department involving contractual arrangements, however, employers should meet the four disclosures required by the eSign Act as discussed above. By providing the disclosures to employees, the employer will take adequate steps to ensure that their electronic signature binds employees.

The insurance industry is rapidly adopting the electronic signature method of conducting transactions. Signed applications for insurance policies are quickly being replaced with electronic documents utilizing e-signatures. Electronic enrollment and eligibility is also a growing field where e-signatures have replaced the need for Human Resource (HR) Administrators to maintain and file mountains of paperwork. Prior to the advent of the eSign Act, many federal laws allowed for computerized storage of personnel records. The eSign Act, however, provides employers with yet another opportunity to eliminate mountains of paper by storing documents signed by employees electronically. All information can be safely and securely stored online where the HR Administrator has complete control and access to the information. If you would like additional information on how electronic enrollment and eligibility and e-signatures can help you save time and money, please contact Rae Kirchhoff at businessolver at 515-223-6980.

Kelley, John, "Electronic Signatures Act (ESIGA)." In the Spotlight: The Internet Law Journal, July 10, 2000, http://www.tilj.com/content/ecomarticle07100001.htm> (February 15, 2002).

Revnew, Thomas R., "The E-Signature Act: What to Know." Top Story by Human Resource Exectuvie Magazine: Workindex.com, n.d., <http://www.workindex.com.editorial/hre/hre0112-expert01.asp> (January 30, 2002).

Walker, Andy, "A Paperless Future: Digital Signatures & Electronic Paper." Feature Article: Viewz, n.d., <http://www.viewz.com/featurearticles/paperlessoffice.shtml> (February 15, 2002).