How to ensure Esign Act compliance: Checklist included
Digital signatures have changed the game for organizations seeking a seamless way to finalize contracts and agreements. However, the convenience of eliminating pen and paper hasn’t eroded the ongoing need for data privacy and legal compliance.
It might sound like a mouthful, but the Electronic Signatures in Global and National Commerce Act (E-Sign Act) plays a key role in ensuring electronic signatures are both legally-binding and acceptable.
For organizations using, or transitioning, to digital-based processes, it serves as a guiding light for compliance and to ensure federal guidelines are adhered to.
Understanding the E-Sign Act
Enacted by U.S. Congress, the E-Sign Act exists to make sure that digital signatures are as legally binding and legitimate as their traditional hardcopy equivalents.
It requires those involved in the signature-gathering process to give permission for their electronic records and signatures to be used for a transaction. They must also give consent for those records to be stored, so that either party can refer back to the agreement at any time as needed.
It’s worth noting that the E-Sign Act requires organizations to retain digital records for a specified period to comply with certain laws and regulations. By complying with this requirement, organizations can better guard themselves during audits or in the event of a dispute.
Another key consideration is that there must be a way to link the electronic signatures with those signing them, with digital records kept to prove the contracts are legitimate.
Although most people are on board with using digital signatures for modern transactions, the E-Sign Act does contain a clause for those more wary. It states that signatures should be given an option to withdraw their consent to use digital records and signing systems.
Ensuring E-Sign Act compliance: A comprehensive checklist
Now, let's break down the steps you need to take to ensure compliance with the E-Sign Act. This checklist will guide you through the process, helping you establish a robust framework for electronic transactions.
1. Obtain Consent
As with most things in life, communication is key. Organizations must be clear in detailing how digital records will be used by the signatories involved.
They should also be transparent in disclosing the benefits and implications of using electronic methods to seal deals. This means ensuring that the language used to seek consent is easy to understand and devoid of jargon that might cause confusion so that the signee understands what they’re agreeing to.
For the organization collecting signatures, obtaining consent is crucial for establishing their legal validity. When individuals provide their explicit consent to use electronic signatures, it helps ensure that the signed documents are legally binding.
2. Provide Access
Just as a client would be hard-pressed to sign a traditional contract without a writing device, it would be a challenge to complete digital signatures without the right tools.
Before initiating a contract, organizations should ensure that signatories have access to the necessary technology and can access the transaction’s records. This might involve considering the technological capabilities of a customer. A less tech-savvy person might need help walking through the steps—and even a tutorial—while others might breeze through the contract without guidance.
Finally, all records should be available to signatories both during and after the transaction. Links or download options are easy ways to facilitate easy access.
3. Link records with signatories
Electronic signatures can carry more legal weight in a dispute than traditional signatures given the measures taken behind-the-scenes to authenticate them.
For instance, digital signature solutions often use various authentication methods to ensure the identity of the signer. This could include password protection, two-factor authentication, and biometrics.
When seeking out a digital signature provider, ensure they are securely linking electronic records with the identities of the signatories through such methods. As an extra layer of caution–and to ensure the authenticity of documents–they should maintain comprehensive audit trials that track the process from start to finish.
Finally, staying informed about the latest security standards and best practices is crucial in maintaining the security of electronic signatures.
4. Record Retention
While the E-Sign Act does not specify a retention period, organizations must comply with certain industry regulations and legal requirements. Rules on how long a document must be stored could vary, based on the type of document and the industry.
Some documents, such as intellectual property or real estate contracts, have longer retention requirements due to the sheer nature of the information they contain. Conversely, other documents like event planning or temporary employment agreements might negate shorter shelf lives.
Other factors that could impact retention are organizational policies, or security and authentication mechanisms used by a digital signature solution. Secure storage and access controls are essential to maintaining the integrity and authenticity of digital signatures.
Organizations should familiarize themselves with industry-specific and jurisdictional regulations for specific guidance on electronic record retention to ensure compliance.
Once retention rules are established, ensure secure storage solutions are in place for electronic records to protect them from unauthorized access or tampering. Encryption and other security measures can help safeguard sensitive information.
5. Withdrawal of Consent
The E-Sign Act includes a provision that allows individuals to opt out of electronic transactions. If a party prefers not to go digital, they have the right to withdraw their consent and choose non-electronic methods.
Ensuring transparency and simplifying the opt-out process are essential to complying with the legislation.
6. Compliance monitoring
Ensuring compliance can be a multi-step and daunting process. To ensure all the bases are covered, consider:
- Conducting regular internal audits of electronic signature processes and documentation. This involves reviewing procedures, records, and security measures to identify and address any potential issues.
- Examining documentation related to electronic signatures. Ensure that you have clear and comprehensive records of consent to use electronic records, associated agreements, and any withdrawals of consent.
- Assessing security measures in place for electronic signatures. Verify that authentication mechanisms are robust and that measures are in place to protect against unauthorized access and tampering.
- Staying updated on changes to the E-Sign Act and related regulations. Compliance requirements may evolve, and it's essential to adapt your processes accordingly.
- Regularly assessing your organization’s third-party electronic signature providers to ensure compliance with the E-Sign Act and other applicable regulations.
7. Employee Training
Regularly review and update training programs for employees are critical for those involved in electronic transactions. This can help ensure that staff members are aware of the legal implications, security measures, and proper procedures for handling electronic records.
Beyond that, organizations should maintain documentation of that training, including updates and refresher courses. This documentation serves as evidence of an organization's commitment to compliance.
8. Legal Consultation
Legal professionals can provide valuable insights and help you navigate complex legal requirements by reviewing processes to ensure documents are above-board. They provide a crucial layer of expertise and guidance to ensure that your use of electronic signatures is legally sound, compliant, and protective of your rights and interests.
Legal consultation can also help organizations navigate the complexities of electronic signature laws and regulations, reducing the risk of legal challenges and ensuring the effectiveness of your digital transactions.
Like employee training, documenting legal advice could prove useful in the future. By maintaining records of legal consultations and advice regarding E-Sign Act compliance, an organization can demonstrate its commitment to legal compliance.
A legal and strategic obligation
Ensuring E-Sign Act compliance is not just a legal obligation; it's a strategic imperative for organizations seeking to leverage the benefits of digital transactions.
By following this comprehensive checklist, you can establish a robust framework that not only meets the legal requirements but also enhances the overall experience for signatories. Embracing electronic signatures responsibly opens the door to increased efficiency, reduced paperwork, and a more streamlined approach to business transactions in the digital age.
When seeking a digital signature provider, ensure the one you choose is already familiar, and compliant, with the E-Sign Act.
Companies like BlueInk, a secure eSign solution, take data security and compliance seriously and are fully compliant with data regulations. This includes the General Data Protection Regulation, the Health Insurance Portability and Accountability Act, and other federal codes.
Partnering with a company that already has data protection and compliance policies in place means organizations can have the peace of mind of knowing much of the heavy lifting is taken care of. This frees up time to focus on other important contract elements like negotiations and lead generation.
To avoid getting left behind on compliance obligations, and learn more about how electronic signature platform BlueInk can help, sign up for a free trial, here.