E-Signatures

For a variety of reasons, businesses of all shapes and sizes have begun the process of going paperless. However, one stumbling block to this process presents itself when a document requires a signature. Typically, this requires printing the document, signing it yourself, faxing it to the other party, waiting for them to print, sign, and fax it themselves, and finally printing the completed signed document once again and filing it away in a cabinet likely never to be seen again. This process is often time consuming, cumbersome, and ultimately unnecessary. Yet, there is a better way. Electronic signatures have attempted to respond to the inefficiencies of the physical signature process, and in the process have become big business. DocuSign CMO Dustin Grosse has stated that the e-signing sector is on track to grow north of $5 billion by the end of the decade.

While each system provider varies, generally speaking, the process remains largely the same. A document is uploaded to an online service, whether its Word, PDF, or an image, where it is tagged with special annotations at locations where signatures will eventually be placed. The service then sends the new marked up file to the specified recipients, who then “sign” it either with stock cursive fonts, or by manually drawing their signature with the mouse (or finger if using a tablet). When completed, the signed file is sent back to the original sender. No paper or filing required. As a result, e-contracts have soared in usage. As of 2013, EchoSign, another e-signature provider, was processing more than 1.5 million documents a month.

A report compiled by AIIM White Paper using survey data from November of 2012 reveals important trends regarding the implementation of e-signatures. On return of investments, 81% of existing digital signature users have seen a payback within one 12-month budget cycle, and 25% saw a ROI in three months or less. The two biggest areas benefitted by implementation of digital signatures is the saving of staff time and the speeding up of the approval process. They also compiled a list of the main drivers behind implementing e-signature processes. Within 44% of all organizations, half or more of their processes are interrupted by the need to collect physical signatures with the average across all respondents to be 42% of all processes interrupted. On average, 3.1 days are added to most processes in order to collect physical signatures and 2.1 additional copies of paper are printed of each document in order to collect signatures. As of November of 2012, 35% of all respondent organizations had already implemented digital/electronic signatures with another 11% having plans to do so in the next 12 months Oddly enough, the second most resistant profession to adopting digital signatures are lawyers.

As a result, e-signature systems have cut down on paper waste and has streamlined the process by reducing the time and overhead costs that occur when filing, printing, scanning, e-mailing or mailing documents that require a signature. E-signatures have also helped alleviate fears that paper documents may have been altered or modified after being signed and sent as they cannot be imitated by someone else and allow for automatic time-stamping of documents. The ability to ensure that the original document arrived and was processed via a recorded chain of activities helps ensure the integrity of the process by leaving a proven electronic trail showing the history of the actions taken by the sender and the recipient in the signature process.

E-Signatures and the Law

Despite lawyers being one of the most resistant professions to adopting e-signatures, they have become ubiquitous within the legal community whether it be within transactional documents, or documents filed with a court. The statutory provision covering electronic signatures in Ohio is found in the Uniform Electronic Transactions Act. The relevant statutory provision is found in Ohio Revised Code section 1306.06, which provides in pertinent part that any record, contract or signature may not be denied legal effect solely because it is in electronic form and that an electronic signature satisfies any and all laws that require a signature.

In 2008, The Supreme Court of Ohio released standards to help clarify the usage of electronic signatures on documents with the courts. The Court outlines three categories where electronic signatures may be used when transacting with a court. The first category involves transactions where the record is electronically signed by someone else and transferred to the clerk. The second involves transactions in which court personnel, including judges and magistrates, electronically sign a record which is filed with the clerk. The third is when court personnel, typically the clerk, electronically signs a record which is sent to an outside recipient. As long as the electronic signature is used under the auspices of a local rule adopted in accordance with Sup. R. 27, they shall have the equivalent level of legal protection that is given to paper-based signatures. Within these guidelines, the Supreme Court also outlines five different methods for authenticating e-signatures, and the minimum authentication requirements for specific situations.

Recent case law from the appellate level in Ohio has followed the Supreme Court’s lead. In 2010, an Ohio appellate court ruled on a matter involving a claim that the trial court’s usage of electronic signatures violated the defendant’s rights pursuant to precedent and the Criminal Rules of Procedure. The court held that “the use of the electronic signature by the judge constituted the attestation of a judicial act…and were valid under the law of this jurisdiction.” The precedent that as long as an electronic signature is used pursuant to a local rule then it is valid and enforceable was followed once again in 2014 by another Ohio appellate court. Likewise, nearly every Federal Circuit Court has upheld the validity of electronic signatures when they are used under the auspices of local rules or federal laws.

With both legal precedent, and business strategy supporting the adoption of e-signatures, it seems that it will only be a matter of time before even more businesses began adopting them as a means of both reducing waste, saving time, and increasing profit.