Paperless Office' Issues in International HR

Back in the decades before information technology marginalized hard-copy HR documents, paperwork containing employee signatures and staff sign-offs continually expanded—think of job applications, offer letters, tax/social security and immigration forms, employment agreements, benefit-plan enrollments, time cards, safety logs, performance reviews, expense reimbursement forms, acknowledgements of handbooks and codes of conducts and many more.

Now, of course, multinationals strive to avoid generating, archiving and retrieving paper HR documents, which are so cumbersome to track across borders. As organizations migrate to electronic recordkeeping and virtual HR documents that exist only on intranet servers or in the cloud, hard-copy HR paperwork—even documentation bearing staff signatures—is in steep decline. Paper HR documentation becomes increasingly superfluous as employers adopt high-tech HR information systems and specialty paperless HR providers.

Not surprisingly, a new-hire these days has less and less need for a pen when onboarding and signing onto routine HR documentation. It is so much easier just to have staff click “I agree” on online tools and intranet forms and to confirm agreements and acknowledgements by e-mail or text message. For that matter, many of the HR documents that still originate on paper now get imaged and stored electronically, just as libraries microfilmed periodicals.

But we need to tap the brakes here. Technology changes quickly while laws evolve slowly. High-technology paperless HR documentation systems are pulling out ahead of slowly evolving legal doctrines. As technology, internationalization and environmentalism marginalize paper HR documentation and physical signatures from a human resources process point of view, centuries of ossified jurisprudence around the world remain embedded in old-school document execution and authentication formalities—paper originals, wet-ink signatures, signing witnesses, notarizations, even (in some countries) government stamps and seals.

The challenge is that in most every country, legal doctrines predating the Internet remain stubbornly relevant in deciding questions of the enforceability of electronic employee signatures, assents, acknowledgements and verifications.

Imagine a hypothetical boss, in any country, who just fired two employees for violating the organization’s code of conduct. Imagine both employees deny ever having seen the code, and their disputes end up in a local court. Employee 1, hired first, had signed a hard-copy code of conduct acknowledgement in wet ink agreeing to abide by the code, which the employer duly filed away for safekeeping. Employee 2, hired later, must have at some point clicked “I agree” to an electronic code of conduct acknowledgement—the organization’s IT department insists that all employees who onboarded since before employee 2’s hire date have had to click past a code of conduct acknowledgement screen to sign onto the company intranet system. We do not need a formal legal opinion from the country at issue to understand why this employer will have a far stronger case holding employee 1 to his code of conduct acknowledgement as compared to employee 2.

And yet legal systems around the world are opening up to workplace-context electronic assents and acknowledgements. Law may change slowly, but it does change. Beginning in the 1990s, governments have been passing formal electronic signature authorization laws like the U.S. E-SIGN Act, European Union directive 1999/93/EC (which is expected to be replaced in July 2016), Singapore’s Electronic Transactions Act 2011, South Africa’s Electronic Communications and Transactions Act 2002, and Mexico’s Law of Advanced Electronic Signature 2012. Now courts in many countries are getting acquainted not only with e-mail but even with the various types of electronic signatures including digital signatures, manual signature-capture devices, identity verification services—even biometric signatures such as fingerprints and retina scans.

Yet these formal statutory electronic signature protocol laws—which in Europe, Mexico and elsewhere are called “advanced” electronic signatures laws—are not always viable or practical in the human resources context. In fact, many of the authorizing statutes that allow “advanced” electronic signatures do not address or contemplate the workplace context. And so only a minority of real-world assents and acknowledgements in the workplace meet the strictures of formal electronic signature authorizing statutes. Even an employer that may go to the trouble to have its staff execute “advanced” electronic signatures on overtly contractual documents like employment agreements, invention assignments and stock option award grants is much less likely to use formal electronic signature protocols when collecting electronic sign-offs on routine workplace documents like time cards, expense reimbursement submissions, performance evaluations and acknowledgements of conduct codes and work rules.

Multinational HR groups want to know: How can we efficiently collect binding electronic employee assents and acknowledgements across borders, and maintain enforceable employee-facing electronic records? The answer breaks into two sub-issues: Enforceability of formal statutory employee electronic signatures versus enforceability of informal employee electronic assents, acknowledgements and HR records.

Formal Statutory Employee Electronic Signatures

Formal or “advanced” electronic signature statutes across many jurisdictions authorize verifiable electronic signature protocols. Therefore, whether a given employee’s electronic signature complies as an authorized electronic signature depends on whether it meets the local authorizing law in the country at issue. Electronic signature law compliance is inherently local.

As to what these electronic signature-authorizing laws mean in the workplace, we might look at Mexico as an example. Electronic signature law in Mexico evolved erratically by case law over a number of years. The status of Mexican electronic signatures used to be uncertain, subject to the reasoning of whatever Mexican judge decided a dispute over an electronic document execution. Then in 2012, Mexico consolidated its electronic signature case law into its Law of Advance Electronic Signature 2012, setting out specific protocols for what Mexico will enforce as an electronic signature equivalent to wet ink. Unfortunately, though, Mexico’s 2012 statute seems to presume negotiable instruments or bilateral contracts—this law does not expressly address workplace-context employee assents. And so Mexico’s 2012 law may not revolutionize electronic assents in the Mexican workplace as relatively few employee assents or acknowledgements in Mexico are likely to meet the law’s strictures.

While only a minority of employee assents and acknowledgments in day-to-day human resources likely qualify as “advanced” electronic signatures consistent with local authorizing protocols, some HR teams sometimes do cross their t’s, dot their i’s and get their staff to execute compliant electronic signatures conforming to local “advanced” electronic signature laws, as if they were executing negotiable instruments. Usually HR teams go to this trouble only with overtly contractual documents like employment contracts, invention assignments and equity/stock option grants. Worldwide, most employers still execute most severance releases with wet ink.

Compliance with formal electronic signature statutes often gets outsourced to qualified third-party providers like DocuSign, which claims to be “the global standard for digital transaction management.” But in practice employers seem to turn to DocuSign-type systems mostly for overtly contractual employee-executed documents. Indeed, the Human Resources page on DocuSign’s own website emphasizes the value of the company’s electronic signatures on I-9 verifications, NDAs, separation agreements and only a few other formal HR documents—it says nothing about staff expense reimbursements, performance evaluations, time cards, safety logs, training attendance logs or dozens of other, less formal employee-attested documents.

A basic but confounding challenge with electronic assents in the workplace is semantics. HR professionals who talk about employee electronic assents, acknowledgements and verifications tend to use the term electronic signatures loosely, confusingly and imprecisely.

Informal Employee Electronic Assents

The more common and more difficult enforceability challenge as to electronic employee affirmations internationally is the problem of informal electronic employee assents that fall short of formal electronic signatures. Multinationals in their day-to-day employment operations often sidestep formal electronic signature authorizing protocols and take shortcuts, collecting informal electronic assents and using electronic recordkeeping tools like “I agree” mouse clicks, intranet forms, e-mails and text messages. Every day countless employees around the world informally assent to many routine workplace documents, particularly less overtly contractual ones like payroll registrations, benefits enrollments, time cards, shift requests, policy/code/handbook acknowledgements, changes in position/compensation, job reassignments, expense reimbursement requests, performance evaluations and expatriate assignments—but sometimes even employment contracts, invention assignments, restrictive covenants and other overtly contractual documents.

Employers want to know whether these informal employee electronic assents are binding. This is tough to answer because by definition informal electronic assents fall short of the strictures in formal electronic signature authorizing statutes. In a sense, we are asking about the enforceability of something that is inherently noncompliant. If an assent is noncompliant, can it ever be binding?

Sometimes it can. The analysis is subject to arguments and depends on facts and circumstances. Whether an informal HR-context electronic assent binds the employee who (purportedly) made it depends on variables including the issue assented to, the extent to which the employee later challenges or denies his own assent, the in-house IT staff’s capacity to prove the assent and the rules of evidence in the forum that would decide a dispute. An employer that cannot tolerate this ambiguity and needs an ironclad enforceability guarantee should either have its staff execute their acknowledgements with wet ink on paper or else comply with the strictures of local “advanced” electronic-signature authorizing statutes.

And so each employer must make strategic choices. An employer that needs the practicality and efficiency of informal electronic employee assents—and that is willing to tolerate some ambiguity as to enforceability—can take comfort in the fact that most informal electronic workplace assents end up being good enough for their intended purposes. Only a tiny fraction later get challenged and litigated in court. On the other hand, the acid test of any informal employee electronic assent is whether it would be admissible, persuasive evidence in a local court. An electronic workplace assent that local courts will not enforce is worthless as soon as some employee denies or challenges it.

In short, this comes down to risk tolerance. The best way to make employee assents enforceable is to get wet-ink signatures (ideally with a signing witness). The second best way is to get formal electronic signatures that comply with the local electronic signature authorizing law. The worst option is informal electronic assents. So use informal electronic assents only where their practicality and efficiency outweigh their (dubious) enforceability. Overtly contractual workplace HR documents may cry out for formal execution. But informal employee electronic assents often make sense for routine HR documents. In each situation where an employer needs a staff sign-off, think through how an electronic acknowledgement will look if some employee later sues and holds management to its burden to prove he assented.

Other Issues

Having distinguished statutory electronic signatures in the HR context from informal employee electronic assents and acknowledgements, several other issues play into a multinational’s electronic employee recordkeeping across borders.

Archiving and proof problems. A vital part of electronic HR assents and recordkeeping that transcends legal analysis is the always-tricky matter of electronic archiving. A lawyer in any jurisdiction advising on the viability of employee electronic assents in some HR context or other will inevitably assume that the client, years later, is going to be able to retrieve a given employee’s electronic assent and demonstrate that, at whatever moment in the past, that employee really did electronically agree. But in fact meeting the employer’s burden to prove that years ago an employee clicked some box on his computer or signed with a finger or stylus, or sent an e-mail or text message, can be surprisingly difficult.

Electronic imaging of wet-ink-signed documents. A separate issue is electronic/PDF imaging of wet-ink-signed paper documents—retaining the electronic image and destroying or losing the original. Obviously there is no electronic proof problem where an employer images a wet-ink-signed document and also retains the paper original as backup. When a dispute over a signed document may be headed to court but only a PDF image of the document exists, the best the employer will be able to do is print up the imaged document and produce the print-up. As with electronic assents, the acid test of enforceability is the question of admissibility in court and weight of the evidence.

Government filings at agencies. Some jurisdictions require that certain employee-signed HR documents get executed at or filed with government agencies. For example, employers in Guatemala must file employment agreements with Guatemala’s General Directorate of Labor within 15 days of execution, and binding employment releases in Mexico must get executed before a Mexican labor agency. Obviously these documents will have to be signed with wet ink on paper until the local agencies start accepting electronic filings. That said, though, the paperless office trend is for the employer to file the paper original with the agency, retaining only an electronic image in employer archives.

Document execution and retention laws. Some jurisdictions impose laws that require written employment contracts. Otherwise, though, laws outside the United States tend not to force employers to draft and retain many specific HR documents. But such laws do exist. For example, the United Arab Emirates requires that employers with five or more staff maintain personnel files and also requires that employers with 15 or more staff maintain a “remuneration register.” Tax laws also tend to require retaining some HR documents. A best practice here is usually to maintain statutorily mandated documents in hard copy—but of course, electronic versions can always be printed up on paper later, when needed. The legal issue therefore becomes statutorily mandated documents (like employment contracts) that contain signatures. Be sure to archive statutorily mandated documents bearing signatures in some way that complies with local document-mandating statutes and retention laws.

Data protection law compliance. Jurisdictions from Europe to Argentina, Canada, Hong Kong, Israel, Mexico, the Philippines, Uruguay and beyond (but not the United States, Brazil, China, India or many others) impose tough omnibus data protection laws that, among other sweeping ramifications, require employers to confine access to HR records about individual employees, preventing access by anyone without a business need. These omnibus data protection laws usually reach both electronic and paper records, signed or not signed, that identify individuals.

Be sure that documents identifying employees, whether employee-executed or not, get archived in ways that comply with local data protection laws. Ensure good confidentiality and data security practices. Comply with restrictions on data exports.

Donald C. Dowling is a partner in the New York office of White & Case.

Republished with permission. © 2014 White & Case. All rights reserved.

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