Picture this: a dimly-lit file room, walls of Bankers Boxes® displaying cryptic case numbers and surnames; a bulky paper shredder nestled in the corner, its last use was most likely in 2015; and a few file clerks, each on their third cup of coffee, asking themselves – what stays and what goes?
The world of document retention is as vibrant and interesting as the image that you have in your head right now, yet it is a crucial matter for companies to deal with.
Document Retention and Destruction Policies
Record keeping is vital because it not only provides information to support many of management’s decisions, but it is also generally required under certain document retention laws. One of the most integral first steps that a company should take with regards to this issue is establishing a record retention policy. By establishing this type of policy, the company mitigates the risks associated with federal, state, and local laws and regulations in effect, as well as protects itself from the threat of grueling audits by various authorities.
Not only must a company be attentive on how long it stores documents, but it must be equally as watchful of document destruction. One should never destroy documents or information in response to a request for information, or after being summoned by court order. Destruction of documents, at that stage, could result in fines, penalties, and even imprisonment.
The High Cost of Record keeping Penalties
Many of us have probably found ourselves scratching our heads asking: how long do certain business records need to be kept? Getting this right could mean the difference between a well-oiled document retention unit and shelling out millions of dollars in penalties to the government and paying exorbitant legal fees.
We can all learn a lesson from Morgan Stanley on why we must remain vigilant to document retention matters. In 2006, Morgan Stanley consented to a permanent injunction and payment of a record-$15 million civil penalty for repeated email production failures. In this proceeding, Morgan Stanley also agreed to adopt and implement policies, procedures, and training focused on the preservation and production of e-mail communications.
More recently, in 2017, FINRA condemned State Street Global Markets and fined it $1.5 million for failing to maintain electronic brokerage records in a non-erasable and non-rewritable format, known as WORM, as required by regulation.
These hefty fines are an example of the mess a company can find itself in if it doesn’t remain alert to document retention requirements.
Setting Appropriate Record Destruction Policies
To be on the safe side, many companies think that it is best to retain records forever. Keeping too much information for too long, however, also poses a risk. Retaining records over the required period is very expensive, might be grounds for privacy rights claim, and could expose a company to serious litigation risks. And, from a Human Resources perspective, HR professionals are on the front lines and could find themselves on the hot seat in litigation having to defend their company’s decision to destroy documents or delete electronic information. This makes for a very uncomfortable experience, to say the least.
While it might seem like you are damned if you do, damned if you don’t, there are simple strategies that a company can implement to avoid any potential document retention problems that might arise.
To learn more about the strategies for dealing with document retention in the workplace, you can join Fisher & Phillips’ Lori Armstrong Halber and Rick Grimaldi for the webcast “Retain or Destroy? Record Retention Compliance and Audit Defense in the HR World” on December 5, 2018 at 3:00 PM ET. Register for this webcast on HR.com where you’ll receive HRCI general credit or SHRM credit for attending.
Many thanks to Rick Grimaldi, Partner at Fisher & Phillips LLP, Lori Armstrong Halber, Partner at Fisher & Phillips LLP and Gavin Carpenter, Associate at Fisher & Phillips LLP for this guest blog post.