Preserving Electronic Records

Today, more and more data is electronically stored on hard drives, smart phones, CDs, flash drives, e-mail servers, and other storage devices. However, storing data electronically has its risks — mainly the likelihood that essential information will be destroyed by accidental deletion, scheduled e-mail deletions, system upgrades, or other methods. Preserving your electronic records is required by law if paper copies are not maintained for required periods. Preservation can also be an important step towards putting your organization in the best position to defend potential lawsuits.

Every employer should develop procedures for ensuring that electronically stored employment-related documents are preserved until your company is permitted and ready to destroy them. Supervisors should be informed of e-mail deletion policies and trained to keep copies of important e-mails concerning disciplinary issues.

Here are the basics for effective and proper organizational records management storage and destruction policies:

Identify and document the method, location, and native file format of information created within the organization.
Recognize that the organization is not obligated to retain all information created or received, unless a business or legal obligation exists for an organization to maintain information. Retaining information beyond these reasons could pose liability for the organization.
Specifically delineate the organization’s electronic records maintenance, storage, and destruction schedules.
Determine how the organization would define “good faith operation” of its electronic information system if called upon to do so.
Establish internal audits or controls to measure compliance with the organization’s storage, retention, and destruction policies. A records management storage, retention, and destruction policy that is not followed is not only useless, it is a potential liability.

Set Up a ‘Litigation Hold’ Procedure

Organizations are expected to establish a records management culture that fosters compliance with all state, federal, and regulatory requirements. The organization should review all current policies and procedures related to risk management, including subpoena processing and the establishment of litigation holds. A “litigation hold” procedure must ensure that information essential to a litigation is preserved. When a hold is enacted, notification of the hold must be disseminated to the appropriate individuals. Not only is this a good idea, but it also is required by the Federal Rules of Civil Procedure when federal litigation is filed.

The Federal Rules and other laws that govern how you preserve electronic records. Under Federal Rule 34, one party in a suit can require production from another party of “electronically stored information” regardless of the medium in which the information is stored or the method by which it is retrieved. Also, each state will have its own rules regarding e-discovery. Most state e-discovery rules will be adopted based on the Federal Rules. Each employer then must be knowledgeable about their state laws regarding discovery and seek the advice of their legal counsel as necessary when responding to e-discovery requests.

It takes careful planning and effort to train employees to properly document and save records electronically. It is important to have a system in place for protecting electronically stored files will help ensure they are accessible if and when they are needed to make employment decisions or defend litigation.

Here are our suggested first steps to ensure your company is prepared to comply with e-discovery obligations:

Establish a well thought-out records retention policy that takes into account any statutory or regulatory obligations.
Make sure someone is really in charge of records retention and that the person knows what to do
Establish a records retention committee that meets regularly.
Disseminate the records retention policy to all employees and test them.
Set up a response team every time there is a litigation need to preserve documents.
Consult outside counsel regarding records retention policy.
Retain an outside vendor, if case warrants it, to assist in organizing litigation holds.
Encourage outside counsel to raise preservation costs at the earliest time.
Ensure general counsel is educated and knowledgeable about organizational technology and an organization’s choices for storing records.
Be very careful to avoid destruction of documents when it is clear there is a duty to preserve, because sanctions can be imposed when documents are destroyed with duty to preserve.
If your organization’s e-document policy is not well thought out, there can be serious consequences. In one case, a court held that “the company acted in bad faith in its failure to suspend its e-mail and destruction policy or preserve essential personnel documents in order to fulfill its duty to preserve the relevant documentation for purposes of potential litigation.” Sanctions were imposed upon the organization, including an adverse spoliation jury instruction.

In another litigation, the court imposed $1 million in sanctions for destroying documents relevant to pending litigation. A third case (Coleman v. Morgan Stanley) – a landmark e-discovery case that healthcare organizations and HR professionals should take note – sanctions were imposed upon a company for “its numerous willful and grossly negligent discovery abuses.” Sanctions imposed included, shifting the burden of proof on fraud issue to the defendant, a jury instruction about the company’s duty to preserve evidence and because of its failure to do so, the facts would be deemed conclusive and finally, an order requiring the company to compensate the plaintiff for costs and fees associated with the dispute.