Are Electronic Employment Contracts Legal in Canada?

In Canada, many people believe that physical signatures have greater legitimacy than digital ones. Accordingly, employers continue to be hesitant to the idea of electronically signed employment agreements particularly in light of risks relating to wrongful dismissal or constructive dismissal. However, this reluctance is not based in our legal reality in Canada, which is that each company operating in the Canadian market is free to use both digital and paper documents and the law will recognize them as equally valid, subject only to a few exceptions.

In practice, this means that, while there may be additional considerations to keep in mind if an electronic contract is involved in the case of a wrongful or constructive dismissal claim, in most instances an electronically-verified document will be enforceable unless there is another basis upon which to challenge its enforceability.

The law of electronic contracts and signatures in Canadian jurisdictions

Both federal and provincial law regulates the use of electronic contracts and signatures.

The law of contracts in Canada is provincial, so the validity of each agreement reached between two or more parties is governed by the law of each province unless the agreement is federally regulated (e.g. an employment agreement with a federally regulated employer).

Accordingly, and at the provincial level, electronic signatures have been accepted by law since 1999 as a part of the Uniform Electronic Commerce Act (UECA). UECA is designed to implement the principles of the United Nations Model Law in Canada by making the law “media neutral”, i.e. equally applicable to digital and paper documents.

Nine Canadian provinces use UECA as a universal set of legislation. In Ontario, the Electronic Commerce Act incorporates these rules into statute. Quebec is the only province that has set out its own electronic signature laws in the Act to Establish a Legal Framework for Information Technology.

At the federal level, the Personal Information Protection and Electronic Documents Act (PIPEDA) officially sanctioned the use of electronic signatures when it came into effect in 2004 by confirming that electronic signatures are equivalent to physical ones and are fully admissible as evidence in a court of law.

PIPEDA goes further and lays out explicit requirements for electronic signatures that don’t necessarily apply at the provincial level. A signatory cannot simply indicate an “X” to sign a legally binding document because generic icons like these cannot be identified as unique or used to prove the identity of the signatory. For electronic signatures to be valid according to federal law, they must be:

1. Unique and distinctive;
2. Created under signer’s sole control;
3. Able to confirm the identity of the signer; and
4. Protected by technology that can detect and/or record any subsequent changes in the document.

Exceptions to the general rule

It is also important to note that various electronic signature laws in Canada outline a few exceptions where a signature will only be accepted by signing a printed version of a document by hand. These exceptions, few of which are relevant to the employment context, are as follows:

• Official court documents
• Certain family law documents required in the case of divorce and adoption
• Wills and codicils
• Trusts created out of wills and codicils
• Certain Powers of Attorney
• Legally required disclosures to consumers where signature by hand is explicitly stipulated by law
• Certain real estate agreements
• Promissory notes

Public bodies (governmental departments, agencies, and ministries) may also each have additional requirements and may set their own technological standards for electronic signatures.

The legal principle of offer and acceptance

Despite the legislation’s favourable treatment of electronic signatures, it is highly recommended that all parties to any contract or business transaction discuss the potential to apply electronic signatures in order to avoid any misunderstandings.

Every binding contract must be based on a legal offer and acceptance that can be demonstrated at the time of enforcement. Electronic commerce legislation provides for the legal enforceability of electronic contracts in general, but it is still necessary to ensure that the electronic offer and acceptance process results in an enforceable contract.

There is relatively little case law dealing with the enforceability of electronic employment contracts directly, but there are a number of cases that have tested the limits of what may create a binding electronic contract in Canada.

For instance, in Rudder v. Microsoft, 1999, two Ontario law school graduates unsuccessfully challenged the “forum selection clause” in Microsoft’s Member Agreement and the court ruled that where an offer clearly indicates that a certain action will constitute acceptance, acceptance can be communicated through the indicated action, such as clicking on an “I Agree” icon.

Electronic amendments to contracts

What about when one party seeks to electronically amend previously agreed to contractual terms? In Kanitz v. Rogers Cable Inc., 2002 the Ontario Superior Court stated that a party could unilaterally change the terms of a paper agreement by posting the changes on a website so long as this was in accordance with the terms of the original agreement.

However, a Quebec court later ruled differently in Aspenser1.com Inc v. Paysystems Corporation, 2004 a case with fairly similar facts, by determining in that it would not enforce modifications that were made to the terms of an agreement by posting them on a website because there was no proof of a clear and unequivocal acceptance of the modification by the subscriber.

Takeaways

While both the legislative and judicial approaches show a tendency to enforce the terms of electronic contracts in general, employers and employees should be aware that the actual enforcement of any given electronic contract is ultimately a question of fact that requires careful consideration.

This issue can be highly relevant to employers and employees not just in hiring, but in circumstances of alleged wrongful dismissal or constructive dismissal.

If you have any questions about the use of electronic signatures or electronic employment contracts in your workplace, please contact Sultan Lawyers by telephone at 416-214-5111 or by here.