Every Organization Needs a Document Retention Policy

Part 1

In a previous column we discussed how scanned electronic files of paper documents can help lawyers meet their obligation to preserve client records, while at the same time reducing file storage clutter. But the fact is that any organization that potentially could be taken to court – businesses, professional associations, non-profits and more – has a similar file preservation obligation. A court can inflict sanctions if it finds that relevant documents have not been preserved and produced during the document search phase known as discovery.

For this reason alone, each organization should have a records management and retention policy that addresses the five steps every paper or electronic document goes through:

• Creation by the individual
• Distribution to intended recipients
• Storage of the physical or electronic document
• Retention of the document based on assessment of its significance and value
• Preservation in a manner that allows the document to be retrieved and searched.

Once a company creates a records management plan that assesses what exists, it should develop best practices and procedures for storing and accessing those documents. Elements of an effective policy could include the following:

• Properly define “document” to include information of all types—electronic or paper, historical record or temporary file.
• Clearly state who (whether by individual name or job title) is the person with retention authority for documents by category type.
• Indicate the length of time for which different kinds of documents should be retained, and identify the people who should have access to them.
• Clearly state why retention is necessary (such as to comply with legal or tax obligations).

This is obviously a complex process. Some government agencies (like the Securities & Exchange commission) have industry-specific requirements for how long certain specialized documents should be kept; and of course the IRS requires records for tax purposes to be kept as long as seven years (see http://www.irs.gov/businesses/small/article/0,,id=98513,00.html). Otherwise there is no universal law of document retention except to comply with the common law requirement to produce documents in litigation. And here is where scanning is an appropriate and effective strategy. Learn how in our next column.

Part 2

An excellent way that any organization can be prepared for providing the huge number of documents required in litigation is by scanning those documents so they are searchable electronically in compliance with the federal rules of evidence. Since 2006 the Federal Rules of Civil Procedure require producing not just paper but all electronic documents and data for trial. Defendants and their counsel must carry out this duty to preserve and provide electronically stored information (ESI), or face penalties from the court.

ESI can encompass a huge number of documents. One gigabyte of ESI can equal up to 75,000 hard copy pages, and the largest lawsuits may require production of up to one terabyte (1,000 gigabytes) of material, or 500 million pages of paper – approximately equal to the height of 58 Empire State Buildings. This information must be produced quickly. The Rules of Civil Procedure allow only a 120-day window after a lawsuit is filed to identify, analyze and classify relevant documents. Then the lawyers must meet to agree on the form in which the e-documents are provided (typically native, PDF or TIFF images) and agree on such logistical issues as accessibility, location and types of information, production formats and matters of privilege.

Scanning documents as searchable PDF files in an ongoing records retention and management program is an excellent way to meet this requirement. Lawyers increasingly use software programs that search for key terms in electronic documents and classify those documents accordingly, a process that used to be extremely time-consuming and expensive with paper. If your documents are already scanned, they can be produced and analyzed faster in the discovery process. The electronic files are just as valid as the paper ones, and much easier to assess and manage.

Being prepared by having all key documents scanned in keeping with the requirements of your records retention policy can be a major advantage in litigation and settlement and save hundreds of thousands of dollars in discovery costs. And of course, if you never get sued, scanning documents in keeping with the retention policy creates a file database that can be more easily searchable for use in future matters (e.g., precedent files), saving both time and money.

Check out part I of this series ‘Every Organization Needs a Document Retention Policy’ to find out why each organization should have a records management and retention policy that addresses the five steps every paper or electronic document goes through and the elements need to make this policy effective.