Many executives believe their organization does not need a records retention program. The reasons for this belief vary greatly, including 1) the belief that the company has gone for years without an organized records retention program so there is no need to develop one now; 2) since the company has never been subject to a large records discovery request, their luck will continue forever; and 3) the fear over the cost of creating such a program (especially in this era of constant increases to the bottom line). However, none of these (or the many others that can be thought of) provide sufficient reason not to develop an effective records retention program and system in this day and age.
On the other hand, there are numerous reasons why an organization should develop a records retention program. Briefly, these reasons include legal requirements, risk of litigation, and efficiency.
Federal and state governments continue to increase regulatory oversight and requirements on businesses. Many of these increased requirements deal with records retention. Generally, the more regulated industries have the most records retention legal requirements. For example, there are many required records retention statutes and regulatory obligations applicable to the financial services industry. A records retention program helps ensure that an organization keeps applicable records for the periods mandated by law. As the requirements on businesses have increased, so have the legal penalties on businesses and individuals for noncompliance. These various potential penalties were brought to national attention with the additional penalties for improper records destruction implemented as part of the Sarbanes- Oxley Act.
Not having an effective records retention program can be a severe problem if the organization is involved in litigation. Once there is reasonable potential for litigation, the organization is under a duty to preserve relevant documents. Even with a process in place for how this preservation is to be accomplished, this can be a difficult task.With no process in place, preserving records can easily become an enormous task. What is often forgotten is that the potentially discoverable materials in litigation include electronic records (such as e-mails and electronic documents saved on the system) in addition to the typically thought of hardcopy documents. Consequently, it is not uncommon for a party to get discovery requests related to relevant email and documents saved on its system, as well as for the responding party to be required to produce such materials. Also, if the organization is later found to have destroyed or not properly preserved applicable documents (including electronic records) after the duty arose to preserve the documents, the organization, and likely individuals in the organization, are in significant trouble and may be subject to severe penalties.
Efficiency and organization of records
An effective records retention program allows an organization to keep track of its business records. Consequently, with a records retention program, if a dispute arises and a certain record is determined likely to be relevant, the organization should be able to find the official company copy of the record in question. This is far preferable to the alternative, whereby numerous employees would likely need to be questioned in a hope of someone having kept a copy of the document in question (and then there is the practical problem of hoping that the person who kept the document actually knows where it is).
The lack of having an effective program also leads to another common problem in many organizations today—the “pack rat” mentality, which occurs when employees err on the side of keeping copies of documents forever.With the continual increase in the size of networks and storage capacity, the problem grows worse and worse, because keeping things becomes easier and easier. Having employees keep copies of the same document is a waste of an organization’s valuable resources. A retention program assists in making the organization more efficient by 1) clearly eliminating the need for multiple copies of the same document to be kept long term (the company is generally only required to keep one copy of a document to comply with retention requirements—hence, all employees but the primary caretaker of the document can promptly dispose of the particular document) and 2) directing the holder of the document as to when he or she is to destroy the document (at the end of the retention period for that document— assuming no suspension of record destruction applies).
Once an organization is committed to developing a records retention program, it needs to be attentive as to how it goes about creating the program. For example, a common reaction may be to purchase an “offthe- shelf” set of records retention policies and procedures to use as the program. However, this solution may be a mistake for many organizations.
A primary objective of a records retention program is that it needs to work for the specific organization. Certain larger, more regulated organizations may require a more complex and detailed program, while other organizations may be able to satisfactorily use a much simpler set of policies and procedures. A program needs to take into account matters such as
- how the electronic systems work;
- how documents are created, stored and tracked;
- how third-party storage is used;
- how e-mail can be managed with the resources the organization has or is willing to acquire;
- how a suspension of document destruction can best be implemented based on the organization’s structure.
The foregoing, along with many other matters related to the organization, must be taken into account and discussed with a knowledgeable records retention expert to ensure that the organization has a records retention program that works as well as it can for that specific entity and the resources it has.To have a records retention program that does not work may be worse than not having a program at all.The real question is, can you afford not to have a records retention program?