Employment Hero’s paperless onboarding means you can send employee contracts in minutes, and they can be returned just as fast depending on how speedy your new hire is! Just like paper contracts, electronic contracts must be signed by both the employer and the employee. But not everyone is used to electronic contracts or signatures, which often begs the question ‘is it legally binding?’.
So are electronic signatures legally binding in Australia?
Electronic signatures are becoming more and more popular in Australia and around the world for a few reasons. Firstly, all businesses are trying to reduce their paper usage, for both environmental and economic reasons (turns out cutting down trees is expensive). Some companies — like Employment Hero — endeavour to be 100% paper-free. Of course paper-free doesn’t mean contract-free! Which brings us to the second point, technology. It’s faster and more secure to exchange important documents electronically than it is to use snail mail. However, there are some important (and obvious) exceptions:
- Signatures that require a witness, like statutory declarations
- Passports and other official Commonwealth documents
- Wills, affidavits and testamentary documents
- In some states and territories, powers of attorney
This leaves things like employment contracts, policy acknowledgments, banking documents and all manner of other documents not included above open for electronic signatures. Finally, it’s important to remember that just like with ink signatures, there are certain conditions that need to be met to make an electronic contract legally binding. These include:
- You must be able to show you can identify the person signing
- You must be able to show that they knew and understood what they were signing
- You must be able to show that the method used to attach/affix signature was reliable
If the above is all accounted for, then it would be pretty difficult for someone to claim that they shouldn’t be legally bound by a contract they’ve signed electronically. And even if they did claim they didn’t sign it, they’d need to prove that someone else did.
“Are signatures captured by Employment Hero legally enforceable?”
We get this question a lot. And mostly around contracts. For legal reasons, we can’t tell you ‘yes, every contract sent through Employment Hero is legally enforceable’. There are too many variables to consider for us to give that guarantee, and some of them aren’t Employment Hero’s responsibility. Let’s go back to the requirements needed to make an electronic signature legally binding:
- You must be able to show you can identify the person signing. This requirement is up to you. Did you address the contract to the right person? Use the right email and physical address? If so, then things are looking good.When you send a new hire a contract, an email is sent to their personal inbox, asking them to set up an account, confirm their first and last name and choose their password. The next page is where they sign the contract; after they have received the email to their personal inbox and after they have confirmed their identity. From there, we use IP addresses, timestamps and hashing to confirm who signed the contract when and from which device.
- You must be able to show that they knew and understood what they were signing. Again, this isn’t something Employment Hero can control. Was the new hire expecting the contract? Were things like hours per week and remuneration discussed during the hiring process? Does the contract align with those conversations? Is the contract one of Employment Hero’s templates? Or have you added your own clauses? If you’re worried, you can get expert advice specific to your situation or just stick to the templates and take steps to ensure the new hire is expecting everything outlined in the contract (which you should already be doing).
- You must be able to show that the method used to attach/affix signature was reliable. One thing we can guarantee is that Employment Hero’s technology captures the required elements to make a document legally binding. In other words, signing documents through Employment Hero is a reliable method to attach or affix electronic signatures. This includes:
- Ensuring no document tampering occurs for users who have signed a document at the time of their intent (through the declaration made). The HR platform also secures the document and emails the hashed documents out to the signatory’s email with a unique code that verifies the documents’ authenticity.
- Implementing top-grade authentication requirements for our users, such as strong passwords and 2 Factor Authentication (2FA) to verify a user’s identity.
- Implementing security practices to hold documents securely and undertaking verification activities to ensure that no tampering of the digital signature has occurred. This also includes auditing of access and modifications made to the HR platform.
- Implemented auditing systems to monitor closely all the protocols and practices above to assist you in any disputes in relation to our document management processes.
Still not convinced?
If you’ve been burned before, you might still have some reservations. The above is not legal advice, so if you’re still unsure, an employment lawyer would be more than willing to advise you on the above for their typical hourly rate. *Formal disclaimer: The information in this article is general in nature. Although all measures have been taken to ensure accuracy, this article should not be substituted for legal advice. Please contact a legal professional for individual circumstances.