Streamlining Agency Operations with Electronic Signatures

Does your agency require "wet-ink" signatures on contracts, resolutions, or permit applications? In California, use of electronic signatures has been valid since 2000. With public agencies increasingly conducting business electronically during the COVID-19 pandemic, more are accepting and using e-signatures for certain official documents. Read on for an overview of the laws surrounding electronic signatures and for considerations in developing electronic signature policies.

Laws Governing Electronic Signatures

What exactly is an electronic signature? The answer is surprisingly broad. An electronic signature is “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” Civ. Code § 1633.2(h). This process can be as simple as checking a box or can involve complex multi-factor authentication using a third-party service. Even a scan of a wet signature in a .pdf file falls within this definition. And under Evidence Code sections 1521 and 1550a physical copy of a wet signature, in the absence of the wet signature itself, can be acceptable evidence of a party’s agreement.

Electronic signatures stand on equal footing with their handwritten counterparts. Neither a contract, record, or signature can be denied legal effect or enforceability solely because it is in electronic form. Civ. Code § 1633.7. There are some exceptions to this sweeping rule, such as for various estate documents, some Uniform Commercial Code transactions, and others set forth in Civil Code section 1633.3.

As with ink signatures, it is important to be able to verify that an electronic signature is in fact the signature of the person purporting to have signed the document. To this end, the law provides that an “electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” Civ. Code § 1633.9(a). This “is determined from the context and surrounding circumstances at the time of [the signature’s] creation, execution, or adoption, including the parties’ agreement, if any, and otherwise as provided by law.” Civ. Code § 1633.9(b).

These rules are set forth in California’s Uniform Electronic Transactions Act (UETA), codified beginning at Civil Code section 1633.1. California’s law is based on a model statute adopted by all but two other states. The federal corollary is the Electronic Signatures Global and National Commerce Act (ESIGN), found at 15 U.S. Code section 7001. ESIGN applies to contracts in interstate commerce and specifically does not preempt state enactments of UETA that conform to the model statute. 15 U.S.C. § 7002.

Public agency attorneys may also be familiar with the term “digital signature.” A digital signature is a specific type of electronic signature—one that must satisfy more exacting security criteria than an electronic signature—and is typically made using a program such as DocuSign or Adobe Sign. Civ. Code § 1633.2(h); Gov. Code § 16.5. Under California law, public agencies may use digital signatures as well as other forms of electronic signatures. Civ. Code § 1633.1 et seq.; Gov. Code § 16.5. State law and regulations specify requirements public entities must follow when using digital signatures. Gov. Code § 16.5; 2 CCR 22000 et seq.

Policy Considerations

Agencies wishing to make use of electronic signatures should do so deliberately, taking into consideration the numbers and types of documents handled by the agency, and the costs, logistics and relative risks and benefits associated with the agency’s current practices compared to proposed electronic procedures. Before undertaking any significant reliance on electronic signatures, an agency should develop policies to guide their use. Key questions include the types of electronic signatures the agency will use and accept, the types of documents for which electronic signatures may be used, and records retention procedures. Agencies should also keep in mind that most litigation disputing the validity of electronically-signed documents has challenged a particular electronic signature’s authenticity or asserted that a party to the document never agreed to transact electronically.

An electronic signature may be something as simple as a check box. While this approach promises convenience, it comes with risk. A party wishing to evade contract obligations may argue that an electronic signature is for some reason not valid, including that the signature cannot be proven to be theirs. In reviewing such claims, courts have considered factors such as:

•    Is there evidence of how the document was sent to the signatory, how their signature was placed on the document, and how the fully executed document was returned to the signatory?

•    Did signing require a unique login ID and password?

•    Is there evidence of the date, time, location, or IP address associated with the signature?

•    Is the signature accompanied by personal information that only the signer would know?

•   Is the signer aware that she is manifesting her assent to the terms of the agreement (e.g., did the signer check multiple boxes demonstrating that intent (likely acceptable) or is intent being shown only by a signature block automatically included in all e-mails (likely unacceptable).)*

Accordingly, the agency should determine the types of electronic signatures it will accept for various types of documents and ensure that the authentication tools used will allow it to make a clear showing in the event of litigation concerning “the context and surrounding circumstances at the time’’ the signature was made. Civ. Code § 1633.9.

In considering the types of documents suitable for use of electronic signatures, the agency will again want to weigh the convenience of an electronic signature against the associated risks and costs. For internal workflow (e.g., documenting compliance with internal procedures) the authentication risks will likely be low. The agency might reach the same conclusion for straightforward recurring agreements with other public agencies. Agreements with outside vendors and with residents can present greater authentication risks and the agency may wish to impose stricter standards. The agency also may choose to set higher standards for contracts with high dollar amounts or liability risks.

UETA applies only when both parties have agreed to conduct a transaction electronically. Civ. Code § 1633.5(b). Therefore, in moving into the electronic realm an agency’s policies should continue to allow for traditional signatures in circumstances where the contracting party will not agree to proceed electronically.

Finally, an agency’s practices and policies should consider document retention. Electronic signatures are generally attached to electronic records. Like all records, these are subject to the State’s records retention laws (see, e.g., Gov. Code § 34090 et seq.) and the Public Records Act (Gov. Code § 6252(g)). UETA provides that records may be retained electronically if “the electronic record reflects accurately the information set forth in the record at the time it was first generated in its final form as an electronic record or otherwise, and the electronic record remains accessible for later reference.” Civ. Code § 1633.12(a); see also Evid. Code § 1550. The agency will want to give careful consideration as to how best retain, track, retrieve, and destroy electronic records in the course of its operations.

* See, e.g., Fabian v. Renovate America, (2019) 42 Cal.App.5th 1062 (contract’s arbitration clause not applicable where company offered no evidence of process for verifying authenticity of homeowner’s digital signature on contract); Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal.App.4th 836 (2014) (arbitration clause not applicable where employer could not show that employee had signed the electronic document); Espejo v. Southern California Permanente Medical Group, 246 Cal. App. 4th 1047 (2016) (upholding arbitration agreement and describing evidence presented by employer to demonstrate validity of electronic signature); J.B.B. Inv. Partners, Ltd. v. Fair, 232 Cal. App. 4th 974 (2014) (in the context of settlement negotiations at issue, attorney’s standard signature block in an e-mail not a valid electronic signature).

For more information, contact SMW attorney Marlene Dehlinger at dehlinger@smwlaw.com.

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