With the growing success of electronic signature providers, an increasing number of employers are signing their employment documents by applying an electronic signature rather than a wet ink signature, but is it a valid way to sign employment documents such as offer letters and employment contracts?
Generally speaking, yes, electronic signatures are a valid way to sign contracts in the UK and are recognized by the UK courts. However, the answer becomes less straightforward when the relevant document is executed as a deed.
When will an employment contract be a deed?
When an employment contract includes a power of attorney, it needs to be executed as a deed for that power of attorney to be effective.
The most common reason for a power of attorney clause to be included in an employment contract is to give the employer power to sign documents on the employee’s behalf to assign intellectual property rights to the company. This can be a useful clause for the company to have in the event that a former employee cannot be found to deal with such assignment of intellectual property rights or if an existing or former employee is not cooperating with such assignments.
How will I know if the document is a deed?
It will usually be clear to you when a document needs to be executed as a deed as it should specifically spell that out; an example of a typical execution block for a document which needs to be entered into as a deed looks like this:
Executed as a Deed ( )
by ( )
in the presence of: ( )
Signature of witness:
Requirement for a witness
Electronic signatures can be validly used to execute deeds, but the key reason why executing deeds by electronic signatures can be less straightforward than signing a normal contract is because of the requirement to have the signature witnessed. While the same requirement for a witness also applies where a wet ink signature is being applied to the document, the nature of electronic signatures and the fact that they can simply be applied by the user when working in the document on their own electronic device, rather than having to print it out and physically sign it, may make it less likely that a witness will be physically present to witness them clicking to apply the electronic signatures.
From a practical perspective the requirement for a witness means that the person signing the deed (whether by electronic signature or wet ink) and the witness need to be in the same physical location. If that is feasible, then electronic signature is acceptable as the witness will see it being applied and can either print the document and sign it using a wet ink signature or can apply their own electronic signature if they have one. However, you could not have the person signing the contract on behalf of the employer apply their electronic signature and send it to the witness in a different location; that would not be effective execution of the deed and it leaves the company open to arguments by a disgruntled employee or former employee further down the line that the contract has not been validly entered into.
If your existing contracts of employment do include power of attorney wording and so should be executed as deed but, from a practical perspective, it is going to be difficult to have someone to witness the application of an electronic signature, what are your options?
The most straightforward way to deal with it would be to remove the power of attorney wording and have the employee sign a power of attorney separately to the employment contract once they start employment. That power of attorney would still need to be witnessed in the way described above, but the benefit of this approach is that you can be assured the remainder of the contract has been validly entered into by both parties signing the contract (whether by electronic signature or otherwise) without the need for a witness.
Another option is to consider the position that is being offered under the contract and whether it is vital for the employer to have the benefit of a power of attorney to sign intellectual property assignment documents, for example. If it is unlikely that the scope of the role will involve the creation of intellectual property rights, you may choose to remove the power of attorney wording. The intellectual property clauses can remain in the contract, just without quite as much power for the employer in respect of those clauses. While this approach is unlikely to be advisable for research and development roles, there are likely to be some roles where it is a good workaround.
- Review your existing contracts of employment to check if they include power or attorney wording and so should be executed as deeds; consider whether this is appropriate for your business needs.
- Speak to the managers who issues offers of employment to establish whether it is feasible to have a witness when electronic signatures are applied.
- Check whether the requirement for a witness to sign the documents was complied with for existing employees; if not, consider taking advice as to potential steps to rectify this.