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The Duty to Preserve Electronically Stored Information: A Primer for Human Resources Professionals

July 1, 2007

Recent studies show that approximately 95% of all information is created in electronic form. Less than 3% of that information will ever be converted to paper. Billions of e-mails are sent through the internet, and stored in electronic format, on a daily basis. Computer systems often retain documents that would otherwise be destroyed, modified or difficult to obtain. For these reasons, and more, electronic stored information is a critical source of evidence.

This is particularly true in employment cases. When a dispute surfaces, vast amounts of potential evidence are often contained within computer systems or other information storage devices. For human resources professionals on the front line, there have been significant developments in the law that require employers to capture and preserve electronically stored information when litigation is reasonably foreseeable. This article will provide a brief outline of these developments, including an overview of the duty to preserve electronically stored information and the consequences that can follow when this obligation is neglected or ignored.

I. Zubulake and the Duty to Preserve Electronic Data
The importance of the duty to preserve electronic data was carefully explained in a gender discrimination lawsuit by Laura Zubulake against her former employer, UBS. In Zubulake v. UBS Warburg, a securities trader for UBS Warburg sued her former employer for sex discrimination and retaliation after she was passed over for a promotion and allegedly subjected to improper, sexual conduct. After the lawsuit was filed, Zubulake discovered that UBS deleted and failed to produce a number of potentially relevant e-mails. Following a motion for sanctions, the court outlined the duty to preserve electronic data, which is triggered when litigation is reasonably anticipated.

In Zubulake, the court provided a detailed explanation of the document retention process for electronically stored information. First, the court made it clear that the company must suspend routine document retention/destruction policy and implement a “litigation hold” to ensure the preservation of relevant documents. Next, the court explained the special duties of legal counsel in the preservation process, which requires active participation and familiarity with the company’s document retention policies and its date retention “architecture.” To fulfill this duty, the attorney must speak with the client’s IT personnel and interview all “key players” (including human resources’ personnel) to understand how information is stored. Counsel must insure that all back up media which a party is required to retain is identified and stored in a safe place. The court concluded with the following admonition: “…it is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.” In Zubulake, the defendants’ failure to comply with these basic requirements led to the imposition of monetary and evidentiary sanctions, including an “adverse inference” instruction that invited the jury to consider the missing documents as evidence of wrongdoing. The result: a $29 million jury award in favor of Zubulake.

Zubulake provides a valuable lesson that applies to human resources professionals: if litigation is reasonably foreseeable, an employer must take reasonable steps to preserve electronic data that is likely to be the subject of discovery. In this respect, a mere “litigation hold” is insufficient. Instead, this is a proactive process which may include the suspension of routine document destruction policies and the implementation of affirmative measures to ensure that all discoverable data are preserved. If these measures are not taken, courts have (and will) impose significant sanctions, including financial penalties, adverse jury instructions or “spoliation” claims that may expose the company to further liability. The bottom line is simple-companies must develop an effective policy for preserving electronic data or face the risk of significant sanctions in the future.

II. Developing an Effective Retention Plan
The collection and preservation of electronic data can be a daunting and expensive process. Often, human resources professionals are the first to receive a demand letter, formal complaint, or even a verbal threat of litigation from an employee. This is where the retention process begins.

The first step is to have a detailed, written retention policy that includes specific guidelines for preserving electronic data. Once litigation is foreseeable, the company should immediately invoke this policy and identify systems that may contain relevant, electronically stored information. For larger companies, this will require assistance from information technology personnel and legal counsel. With all employers, relevant data can be found in obvious places, including individual employees’ hard drives, network files and network servers. Other less obvious places, such as PDA’s, voicemail, instant messaging, blackberries and laptop computers, must also be considered. Finally, it is critical to identify electronically stored information that is being routinely destroyed, as well as back up tapes that contain potentially relevant data. Once this information is identified, it should be secured in its original condition.

An effective retention plan is fortified by communication, training and collaboration with other professionals. The litigation hold must be implemented by all of the “key players” for the company, including human resources personnel. It should be distributed in writing, and followed up with training and communication so that all relevant documentation is preserved. Finally, employees should be given specific instructions regarding the proper use of e-mail and other, internal communications that are certain to be discoverable at a later date. Without question, e-mails are the most damaging source of evidence in many employment disputes.

As a final step, it is critical that the retention plan is consistently and uniformly followed. If the company deviates from the policy that it has created, a court may conclude that it acted negligently and impose sanctions. That is exactly what happened in Zubulake, where a human resources director failed to implement a retention plan and serious sanctions resulted.

III. Conclusion
The human resources professional often plays a critical role in preserving electronic data when litigation is foreseeable. Ultimately, the consistent execution of a carefully drafted retention plan is the best defense when litigation is commenced.

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