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Critical Considerations for Records Management and Retention

Checklist

Scope

□ Applicability to all types and formats of records

□ Applicability to all affiliates, divisions, and business units

□ Risk assessment

□ Third-party contractors and outsourcers

□ Active vs. inactive records

Retention Schedule

□ Detailed list of records categories

□ Employee surveys and interviews

□ Organized by department/business unit

□ Retention periods based on applicable law

□ Retention periods based on operational needs

□ Retention periods based on statutes of limitation

□ Citations to applicable laws

□ Periodic (e.g., annual) review and update

Litigation Holds

□ Responsibility for issuing litigation holds

□ Litigation hold notice

□ IT department involvement in litigation hold process

□ Notification of outside vendors and outside counsel

□ Employees obligated to notify management of pending or foreseeable claims

□ Termination of litigation hold

□ E-discovery procedures

□ Data map

Electronic Records

□ Authorized storage locations

□ Retention, archiving, and destruction of e-mails

□ Retention, archiving, and destruction of voicemail

□ Security and encryption where required (e.g., protected health information, sensitive financial information, laptops and removable media)

Administration

□ Designated records manager

□ Input and approval by board and senior management

□ Confidentiality of employee personnel and medical records

□ Approved methods for destroying paper and electronic records

□ Procedures for distribution to and training of employees

□ Auditing compliance with the policy

□ Off-site storage of inactive paper records

Overview

In light of the vast volume of computer and other electronic files and communications, and litigation obligations with respect to e-discovery, companies now realize the need for a comprehensive records retention policy. Failure to retain records in compliance with applicable law and in connection with pending or threatened claims can result in regulatory and court sanctions, fines, unnecessary expense, and other adverse consequences. Inadequate and ineffective records storage and retention practices can result in (i) the loss of valuable trade secrets, confidential information, and other important business and proprietary information, and (ii) the breach of privacy laws and regulations. The cost (time, money, and resources) of complying with litigation discovery requests can be significantly reduced through implementation of cost-effective records retention and e-discovery policies and practices.

Keeping everything is not the answer. Companies that say they keep everything typically do not. Employees will always discard paper records, electronic files, and e-mails. Destroying records without a policy can result in inconsistent and haphazard retention and destruction practices frowned upon by courts. In light of this inevitable destruction of records, it is imperative for the company to adopt a policy governing destruction in order to avoid liability for selective destruction of records or spoliation.

Hie benefits of an effective records management program include easier and timely access to necessary records; complying with statutory and regulatory retention obligations; reducing storage costs; protection of confidential and proprietary information; and meeting e-discovery obligations. An effective records retention policy can mitigate the risks of not actively managing electronically stored information (ESI), such as the inability to efficiently locate and use important business information, sanctions due to the failure to comply with statutory and regulatory retention and destruction laws, increased costs due to inefficiencies from inaccessible information, and the inability to comply with e-discovery requirements, court orders, and other litigation-related requirements.

Avoiding Spoliation Claims

“Spoliation” is the term commonly used by courts to describe the improper destruction of evidence, most typically documents and records. Although the precise rule varies slightly in different jurisdictions, generally a party is guilty of spoliation if it destroys evidence (e.g., company records) relevant to litigation with the purpose or intent of preventing the other party from using the evidence against the party. Liability can arise from destruction prior to litigation being instituted and sometimes even in the absence of an actual threat of litigation.

The consequences to the “spoliator” can be dramatic. Remedies for improper destruction of records can include (i) monetary sanctions or penalties, (ii) an inference in the litigation permitting the jury to presume that the documents contained damaging information (i.e., information supporting the other party’s position), (iii) sanctions ordering that certain facts be deemed established or preventing the spoliator from opposing a certain factual assertion, (iv) dismissal of claims or entry of default judgments, and (v) criminal liability. In light of the severe consequences of improper destruction, businesses must take a proactive approach to drafting, implementing, and enforcing their record retention policies.

 
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