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A Better Partnership


Feb 2006
February 07, 2006

What Businesses Should Know About -- Document Retention

This article explains why your business should adopt a document retention policy and describes how to obtain a policy that fits your needs.

Documents in the Electronic Age

Traditionally, businesses have developed policies to destroy useless records in order to free up filing space, reduce the staff required for managing information and speed the retrieval of information. In the electronic age these concerns are lessened because whole boxes of information can be stored on a single CD-ROM, and whole warehouses of information can be stored on an intranet site.

However, merely saving every document in electronic format is not the answer. There are certain documents your business may not want to save. But destroying records without an established document-retention policy also is not the answer. If you destroy the wrong documents, then your business may face harsh legal consequences.

To avoid these pitfalls, each business should adopt a sound document-retention policy that provides for the effective electronic storage and destruction of records. Such a policy will provide you with a way to properly manage electronic documents and will ensure compliance with the appropriate legal standards.

Legal Retention Requirements

There are many laws and regulations that specify which records your business must retain, and for how long. These laws affect all records--whether in electronic format or on paper.

The legal requirements for document retention are voluminous and too numerous to list here. There are hundreds of very specific federal and state regulations relating to document retention, and the requirements vary among industries and even among different companies in the same industry.

Following is a very brief list of laws requiring document retention. This will give you an idea of the breadth of document-retention regulation.

  • Retirement Plans. Any business that offers its employees a retirement program, such as a pension or 401(k) plan, is subject to records-retention regulations under the Employee Retirement and Income Security Act.

  • Consumer Products. A business that sells certain types of consumer products may be subject to document retention regulations under the Consumer Product Safety Act.

  • Imported Goods. Businesses that import goods may be required to retain certain documents under the Tariff Act of 1930 and the North American Free Trade Act.

  • Employee Records. A business with employees who seek family or medical leave must retain certain documents under the Family and Medical Leave Act.

  • Environmental Records. A business that produces, handles or processes hazardous waste or that produces, processes or stores certain chemicals must retain documents in accordance with state and federal environmental laws.

  • Health and Safety. All businesses are subject to numerous document-retention requirements issued by the Occupational Safety and Health Administration.

This is only a short sample of the many federal and state laws that affect the retention of documents.

On the other hand, the disclosure of certain documents may violate federal or state privacy laws. A document-retention policy is necessary to make sure that the correct documents are saved to meet legal requirements and that the wrong documents are not disclosed to third parties.

Documents in Litigation

A business should also consider the possibility of litigation in formulating its document-retention policy.

Having the right document in a lawsuit may win judgment in your favor. Not having the right document can cost you the case. Consider a simple example. If you sue Company X claiming that it owes your business $10,000, it will be nearly impossible to win the case without documentation of the debt.

The wrong document can also cost you a case. Your opponent may discover an old and possibly damaging document that could have been destroyed earlier under a document-retention-and-destruction policy. But beware:  If you destroy a document at the wrong time, such as after you receive a subpoena requesting the document, then a court may assume that you destroyed it with an improper motive and impose harsh sanctions on you.

Court-ordered discovery of electronically stored records has exploded in recent years. This makes it all the more important to apply your document-retention policy to e-mail and other electronically stored documents. These are just some of the reasons why a document-retention policy is important for litigation.

Which Policy Is Right for Your Business?

Every business should consider establishing or updating an effective document-retention policy. The best way to do this is to meet with an attorney to discuss your business activities and needs. Once an attorney knows the contours of your business, then he or she will be able to construct a document-retention policy that insures compliance with state and federal law and adequately plans for future litigation.

If you have questions about document-retention policies or are interested in establishing a policy or in updating an old one, please contact your WN&J attorney at 616.752.2000.


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