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A Better Partnership

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Jan 2011
31
January 31, 2011

Retaining records is critical, says Warner’s Dawn Ward

A routine inspection of employment records in Abercrombie & Fitch's Michigan stores has resulted in a $1 million+ fine for the popular retailer – a penalty Warner Norcross attorney Dawn Ward says could have been avoided had the proper records retention policies been in place.

Ward, who chairs the law firm's Records Information Management practice, explains that there are literally thousands of federal and state laws that govern record retention and destruction. If a business has operations in Europe, it will also be bound by a different and often stricter set of guidelines. The proliferation of e-mail and electronic records compounds the difficulties of managing employment and business records.

1-9 forms – which verify whether an individual is eligible to work in the United States – were at the heart of Abercrombie’s troubles. The U.S. Immigration and Customs Enforcement Office audited the Michigan stores and "uncovered numerous technology-related deficiencies" in its record collection and retention processes. The audit did not reveal any employees were on the payroll illegally, but Abercrombie was still fined.

These kinds of audits are on the rise, Ward notes. A special agent working for the office told The Columbus Dispatch that "this settlement should serve as a warning to other companies that may not yet take the employment verification process seriously or provide it the attention it warrants."

Ward says that I-9 forms are just one example of the many kinds of records subject to federal regulations. She explains that employers are required by law to retain these records for either the date of hire and three years, or one year after the employment ends, whichever is longer.

"The Abercrombie scenario shows that not only does a company have an obligation to comply with employment law, but the company must prove compliance for a certain period of time. A lax approach to records retention can quickly turn into a nightmare. Ignoring records retention may be without consequences until an audit comes along and the organization is hit with a substantial fine, as is the case with Abercrombie. The business may also face a lawsuit that requires it to hand over tens of thousands of documents, including e-mail, at what could well be an exorbitant cost to the company. “Developing a good policy and a schedule that lists what records should be maintained -- and for how long -- will likely save time and money in the long run."

Ward says that a good policy includes comprehensive information regarding key elements such as:

  • E-mail management
  • Electronic recordkeeping
  • Assignment of responsibilities
  • Provisions for the storage and protection of vital records
  • Formal hold policy
  • Record retention schedule
  • Application of the European Union Directive on Data Protection (95/46/EC)
  • Document destruction
  • Training and audits

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