Posted on Mar 18, 2015 by Carlyle R. Cromer
Technology has made it easy for us to electronically store documents that would have required warehouse-size space in paper form. Now, businesses wrestle with the question of what they can safely get rid of, and what they must retain. This is especially a problem for small businesses, which may not have the luxury of designating someone to supervise document retention.
In litigation, the consequences can be severe for businesses that are too quick to dispose of documents. Regulatory agencies and courts may impose significant monetary sanctions when documents are improperly destroyed, and judges may instruct juries to assume that missing documents would have proved the other party’s case. Sanctions also can include all of the attorney and discovery costs associated with the other side’s pursuit of the missing documents.
Document retention is a risk management issue for all businesses. Your business must have a document retention policy that is written to minimize your legal exposure.
Here’s how to get started.
Identify your documents
Start by identifying all of the types of documents that are common to your business. A surprising number of documents have legally-mandated requirements for retention.
For example, the Age Discrimination in Employment Act of 1967 (ADEA) and the Fair Labor Standards Act (FLSA) require employers to keep payroll records for three years. The FLSA also requires employers to hold on to employee evaluations and some other records for two years. The Occupational Safety and Health Administration (OSHA) requires that records of employee injuries be kept for five years, although there are exceptions.
Don’t try to figure this out on your own; ask legal counsel familiar with your industry if you’ve covered all the bases for compliance.
Develop a retention policy
You must have a formal policy for document retention. Even if your policy is questioned in litigation or by regulators, you are better off when you can demonstrate consistent treatment of documents.
A policy also takes the guesswork out of retention for your employees. You don’t want ad hoc retention policies based on individual department manager or employee preference.
Litigation puts all document disposal on hold
Once you anticipate litigation, you must retain all potentially relevant documents. Courts have said that not only must you retain documents if you are sued, but you must hold on to records if you reasonably anticipate you will be the subject of litigation.
Unfortunately, courts haven’t been clear in defining what constitutes “reasonable anticipation.” Certainly, if you receive any communication from another party’s counsel about a dispute, that’s reason to expect litigation. Other warning signs may fall into a gray area. Always consult counsel before you get rid of records that might be the target of discovery.
Consistency is the key with email
Email doesn’t have to be kept indefinitely, but you can run into problems if you dispose of email selectively. Old email can clog servers, so your policy may be influenced by your storage capacity.
Whatever length you decide is appropriate, stick to it for all employees and all emails. Ideally, your IT department will set up a program for automatic deletion after a certain time. If you depend on individual employees to delete emails, remind them of the policy periodically.
Over-retention can hurt you
Some might ask, why not just keep everything?
Assuming you have the capacity to do so, it’s still not a good idea. An opposing party’s discovery requests are never designed to target documents that will prove your side of a case, so the documents you save are more likely to hurt than help you.
There’s also the cost. Going through documents to satisfy discovery requests – which may require redaction and many, many hours of hands-on time – is expensive. If you save more documents, it can only make this chore more costly.
One mistake we see companies make is to rely only on their IT staff to develop document retention policies. But, the larger cost of document retention isn’t buying more server space. Rather, it’s the fines and sanctions that courts or regulatory agencies can impose on companies that don’t adhere to legal requirements. Include your legal counsel when you write your document retention policy.
Carlyle R. Cromer is a business litigator in Turner Padget’s Myrtle Beach office. He represents both individual and corporate clients in wide-ranging disputes within the commercial sphere. Critical to his success is his ability to explain complex concepts in a manner that is easy to understand. Carlyle also handles insurance litigation matters and has taken cases through the appellate process. He may be reached at (843) 213-5540 or by email at email@example.com.