Record Retention Policies

• Jurisdiction: United States,Federal
• Law Firm: Carter Ledyard & Milburn
• Subject Matter: Employment and HR, Government, Public Sector, Employee Benefits & Compensation, Employee Rights/ Labour Relations, Fiscal & Monetary Policy
• Author: Mr Guy Lander and Jennifer "Jenny" Frank
• Published date: 25 May 2023

Record Retention Policies present a host of issues beyond the retention and destruction¹ procedures that well-managed businesses would adopt if commercial concerns such as corporate governance and risk management were the only considerations. Furthermore, these Policies are better described as Record Destruction Policies because their principal goal is to set a date when records can safely be discarded without fear of financial or other adverse consequences.

Whether a particular document's retention will turn out to be beneficial or detrimental depends on the circumstances and the document itself and should take into account legal, litigation, and business requirements. A separate education of employees is required to avoid the preparation of potentially detrimental documents. For example, despite constant reminders, thoughtless e-mails written in haste often come back to haunt the sender as "smoking guns" in litigation.

Goals and Adoption of a Record Retention Policy

Record Retention Policies are regulated by multiple rules and laws. First, there are certain U.S. legal requirements to maintain certain records for designated periods, and to provide them to government agencies under certain conditions. Second, there are basic corporate records and important agreements and other documents that should be retained and safeguarded. Finally, there are evidentiary and discovery requirements if the Company becomes involved in litigation or regulatory proceedings.

A thorough Record Retention Policy provides retention guidelines and procedures for storage, organization, retrieval and, ultimately, destruction of documents. The Policy designates the individuals responsible for compliance, and the Policy provides for the suspension of the Policy in the event of litigation or an investigation or other designated events.

There are two kinds of company records, temporary records and final records. Temporary records include all business documents that are intended to be superseded by final records, or that are intended to be used only for a limited period of time, including written memoranda and dictation to be typed in the future, reminders, to-do lists, drafts, and interoffice correspondence regarding a client or business transaction. Temporary records can be destroyed or permanently deleted if in electronic form when a project or matter closes. Before destroying or deleting temporary records, ensure that you have duplicates of all final records pertaining to the project or matter, and organize final records (and duplicates) in a file marked "final." Then, store the final records appropriately as required by the Policy.

Final records include all business documents that are not superseded by modification or addition, including documents given (or sent via electronic form) to any third party or government agency, final memoranda and reports, correspondence, handwritten telephone memoranda not further transcribed, minutes, specifications, journal entries, cost estimates, and the like. All accounting records should be deemed final records. All final records may be discarded 10 years after the close of a project or matter.² Further, permanent records include all business documents that define a company's scope of work, expressions of professional opinions, research, and reference materials, including, but not limited to contracts, proposals, materials referencing expert opinions, financial statements, tax returns, payroll registers, copyright and trademark registrations, patents and other documents relating to intellectual property rights, environmental reports, real estate records, and formal minutes of meetings. Permanent records are final records that should be retained indefinitely.

The typical Record Retention Policy divides documents broadly into two categories:

1. No Retention: Records that can be discarded immediately.
2. Designated Retention: Retention for specified periods, or permanently, as appropriate.

Since retention of hard copies and electronic documents is expensive and often time-consuming, the most common preference is toward discarding any documents that are not required to be maintained. Unfortunately, even a general destruction policy can sometimes raise adverse inferences in litigation.

Because of their importance, Record Retention Policies should be reviewed and approved by senior management, should be communicated to and acknowledged by all relevant employees, and should be enforced consistently. Violations, in the form of either early destruction or late retention, should be treated seriously and should be remedied and disciplined if appropriate. As a client, your General Counsel's Office should have a designated attorney or designated outside counsel to supervise the Policy, to interpret it in specific cases, and to supervise employees' training.

For a full listing of document retention periods, please see the Schedule at the end of this Advisory.

The Federal Rules of Civil Procedure and its Applications

The Federal Rules of Civil Procedure, last amended in 2022, have extensive and demanding e-data discovery rules, with early "meet & confer" requirements and schedule agreements, negotiation of "easily accessible" and other e-data, with possible shifting of discovery costs, privilege issues, agreement on the forms of production of e-data and records, and safe harbors for good faith loss or destruction of relevant electronic records. These rules require counsel to become quickly expert regarding every aspect of their client's record retention policies and procedures.

Under FRCP 26(f), parties must "meet and confer" as soon as practicable and at least 21 days before a scheduling conference is to be held or scheduling order is due. This requires immediate assembly of the legal and business team and advisers, identification of the "most knowledgeable" persons, and an immediate plan for e-discovery and implementation of the "litigation hold." A "litigation hold" is a process to preserve all data that might relate to a legal action involving the company or a particular matter or project, which may also be called a legal hold, preservation order, or hold order. The retention policy must be analyzed with the IT staff, who will be critical in the process, and corrected if necessary to ensure adequacy and reliability.

Where in the world is the potentially discoverable data, and how is it stored and protected? Is the data reasonably accessible, and, if not, is it nonetheless discoverable if "good cause" is shown under FRCP 26(b)(2)? The accessibility burden is on the party resisting discovery. Is the "litigation hold" clear, correctly implemented, and enforced? Are the discovery review software and systems adequate, flexible and protective of confidentiality? Inadvertent disclosures are now easier to "call back," but are still best avoided to begin with.

FRCP Rule 37(f) provides a "safe harbor" for documents inadvertently destroyed despite "good faith efforts" to maintain and abide by a record retention program. An effective program, in place and enforced, is required to...