The Importance of a Sound Document Retention Policy

December 11, 2007

Many employers are uncertain about their obligation to retain employment records. While state and federal law may require the retention of certain records for a period of time, you aren’t necessarily required to retain employment records forever. That being said, high-profile cases, including the Arthur Andersen trial, have raised public awareness about the dangers of document destruction. A well-crafted document retention policy can promote efficiency, save valuable computer storage space, and ultimately protect you in the event of litigation.

Basically defined, a document retention policy provides for the systematic review, retention, and destruction of documents received or created during the ordinary course of business. A solid document retention policy will identify documents that need to be retained and provide clear guidance for how long certain documents should be preserved and the circumstances in which they can be destroyed. The policy should be written in clear, objective, and simple terms so that it can be implemented by all key personnel and tracked over the life of the business.

A clear document retention policy provides guidance to HR personnel and supervisors about which documents should be retained and for how long. If followed carefully, the policy also can provide you with a “safe harbor” from later allegations of spoliation, or the improper destruction of documents. While you should always take immediate efforts to preserve and retain electronic data and other documents when litigation is reasonably foreseeable, a document retention policy provides legal protection for employers that destroy documents during the ordinary course of business before a litigation hold is commenced.

New Amendments Provide Safe Harbor
The importance of a document retention policy is acknowledged in new amendments to the Federal Rules of Civil Procedure. Given the duty to preserve electronic data and the potential for spoliation of evidence claims when that duty is violated, the rules recognize that some electronic information will be destroyed as a result of the routine “good-faith” operation of an electronic information system. Accordingly, the new amendments provide a safe harbor that protects a party from sanctions when electronic data is lost or unrecoverable because of good-faith reliance on a regular business practice.

To qualify for the safe harbor, you must demonstrate that the destruction was made in good faith and was a result of routine business operations. While the safe-harbor provision doesn’t override the duty to preserve and quarantine potentially discoverable information, it does provide significant protection for parties that destroy documentation in normal business practices before litigation is imposed.

Even though the new amendments to the Federal Rules of Civil Procedure technically apply to electronically stored information, they point to the benefits of an objective, uniform document retention system. That’s particularly true in the employment context, where personnel records serve as a primary source of information for employees who decide to initiate litigation. If that information is destroyed, the employee is certain to argue that foul play was involved and that the destroyed information contained evidence that would be beneficial to her claim.

In addition, it’s critical that you monitor the destruction of backup tapes and archival data to ensure that they’re available and in compliance with the applicable document retention plan.

Draft Carefully
Careful drafting is necessary for the implementation of a workable retention policy. An effective document retention policy will clearly define the documents to be retained and the time period for which destruction can occur during the ordinary course of business. The policy also will identify the personnel responsible for retaining and destroying documents to ensure that a well-defined system is followed.

Obviously, you should retain documents for all active employees and continue to retain them under the various time periods set forth in both state and federal law. After that time period expires, a consistently and objectively defined retention policy will provide strong evidence of good faith, which can provide valuable protection to you if litigation follows.

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