Is your business using electronic signatures correctly?

It’s no secret: Commerce has gone digital. Whether you’re shopping online at a niche boutique, or swiping a credit card for the plumber fixing your kitchen sink, digital commerce is everywhere. And with it, we’ve entered a realm of digital identities, too. You’re no longer defined by your face matching your photo ID, you have an entire digital presence, including a digital signature. But is your business keeping up with your personal life? 

The implementation of electronic signatures is nothing new. Even in the 1980s, there were conversations around the idea of a copied or faxed signature being classified as an electronic signature. The eSignatures of today, however, look vastly different than what we saw back then. And between a growing global economy, long-distance employment rising in popularity, and online transactions happening every minute, your business should have an option for capturing electronic signatures. The devil is in the details for the world of electronic signatures, and depending on your industry and location, your requirements for those signatures can vary. Starting with a deep understanding of electronic signatures is a great place to start, or even learn a little more about the business you’re conducting with your customers.

What Is The E-SIGN Act?

The Electronic Signatures in Global and National Commerce Act, (E-Sign Act), was signed into law on June 30, 2000, but it took until 2007 for the Federal Reserve Board to finalize and adopt the detailed rules and standards of legally binding, electronic signatures. For many of us, 2007 doesn’t seem so long ago, but this legislation has been put to the test and upheld through multiple court rulings over the last 15 years. Of course, in typical legal fashion, there have been additional laws and standards implemented before and during those years, such as the Uniform Electronic Transaction Act (UETA) of 1999 which set initial standards for electronic commerce, including electronic signatures. 

All legalese aside, one of the biggest takeaways here is that since the moment people realized the convenience and availability of digital commerce, there’s been a need for a way to capture legally-binding signatures. That led us to the eSignatures we know today, but also paved the way for individual industries to want their own specific requirements met. From real estate to food processing, and even daily credit card transactions, you should always review what your industry standards are for capturing digital signatures. Even contacting a local business attorney in your area can help make sure you’re abiding by any additional or stringent requirements for your business, specifically.

Why Haven’t E-Sign Laws Been Updated?

In short, it’s not that eSignature laws and compliance regulations haven’t been updated, even though the initial enactment was 23 years ago. These baseline laws laid such an all-encompassing framework that they just needed to be built upon. Similar to how the United States Constitution hasn’t been outright rewritten, but it has had many amendments and court-ruling precedents implemented to further define how it should be interpreted and enforced.

But it isn’t all “it’s not broken, don’t fix it” because different jurisdictions, and countries, have enacted specific laws and regulations around electronic signatures. For example, the European Union has an eSignature Directive that has gone through multiple iterations, in part due to the transition into the EU itself. Even specific industries within countries can have unique verification or execution mandates, such as the Food and Drug Administration (FDA) within the United States. The FDA has its own guidance around its thinking and implementation towards eSignature, outlined specifically in part 11 of Title 21 of the Code of Federal Regulations. 

With so many subtle differences around electronic signature capture, it’s important to check in with regulating institutions in your area, and your industry, to confirm that you always stay up to date on the latest requirements. Thankfully, business attorneys are always happy to help break down these details and steer you in the right direction. If you haven’t talked to one yet, but you’re looking to implement or expand your electronic signature capture, it’s worth the time to do so.

Why is the E-SIGN Act so Important?

Aside from protecting your digital invoices and contracts, the E-SIGN Act was a huge turning point for the global economy. 

Bigger Opportunities for Smaller Businesses

World trade had seen massive growth from major buyers and manufacturers that had the resources to ship and receive around the globe, but most daily purchases for individuals still took place locally, or at least nationally, and within brick-and-mortar shops. Electronic signatures, and the additional legislation alongside them, opened the door to expanding those transactions to everyone, on every continent. While that transition didn’t happen overnight, it was the beginning of a shift in the way consumers behaved.

For United States citizens specifically, the moment U.S. President Clinton signed the E-SIGN Act into effect on the same grounds the Declaration of Independence had been signed 224 years earlier, this Act was a sign that the economy was primed for unprecedented growth. Today we’re still seeing the impacts of this growth. And while there are plenty of socio-economic factors tied to a globally expanding economy, even small businesses are now given a chance to compete with larger retailers on a global scale. 

Legally Protected and Binding Signatures

Before formalized legislation, electronic signatures were subject to disputes and concerns, especially when used for contracts. Under the current legislation, specifically in the United States, “no contract, signature or record can be denied legal effect solely because it is in electronic form.” This meant faster, legally-binding transactions for long-distance agreements, contracts, and purchases, including your ability to now buy anything from anywhere that will accept your credit card. 

Contracts and purchases happening internationally still have to abide by the electronic signature requirements in both regions, or in some cases only the region of the buyer or the seller, but a quick check-in with your business attorney can help you define which regulations you need to keep in mind to stay compliant. 

When Would I Need an Electronic Signature?

Understanding the differences between a legally-binding electronic signature form and a simple digital signature capture can be difficult. Most use cases can be identified by that single phrase: Legally-binding. 

If you know that your signature needs to hold somebody legally accountable for something, such as a contractual agreement or a payment guarantee, then typically you’ll want to opt for an E-SIGN-Act-compliant signature. If the form being signed only needs to indicate that it was seen or reviewed by a specific individual, then a standard digital signature capture could suffice. For example, if you’re a professional consultant, and you need your client to sign an agreement to not disclose your proprietary methodology for your work (such as a non-disclosure agreement, or NDA) then it’s more likely you would want to use an E-SIGN Act-compliant signature. Alternatively, if you have a construction team that needs to run through a safety checklist at the start of their workday, a digital signature capture would likely serve your needs.

Ultimately it comes down to preference, your business application for the form or paperwork, and laws or regulations for your area and industry. Once again, a quick conversation with your business attorney can clarify which you need in any given circumstance. Overall, electronic signatures are an important way to expand your business, protect your agreements, and hold clients and team members accountable. While the topic can be difficult to understand, it’s worth the time investment to make sure that you have a digital form provider that can support whatever electronic signature requirements your business has.

About GoFormz

Move your forms online with GoFormz. We believe that everyone should be able to fill out their forms online and deliver products and services that redefine how people and businesses collect and process information. GoFormz is the online form solution to capture your data on any device, and send it wherever you need it most. Through native integrations and an open API, take complete control over all your forms and data capture. Whether you need to convert a PDF to a fillable form, or capture E-SIGN Act-compliant electronic signatures, GoFormz is ready to help streamline your entire business.