The complexities of avoiding—and winning—employment litigation have become more complex. Recent amendments to the Federal Rules of Civil Procedure impose a higher level of scrutiny on a company’s obligations to preserve electronic documents before a lawsuit is filed. Employers should begin preparing now because the failure to do so can be disastrous.
Companies once responded to possible employee litigation only after a discrimination charge or lawsuit was filed or upon receiving a letter from a disgruntled employee or his lawyer. Not so anymore in the new electronic world of document creation and automatic deletion. Federal law now requires that employers take proactive steps to preserve electronic documents that could be relevant to litigation. As a practical matter, this means that companies should review their document retention and deletion policies to make sure they are compliant, and prepare for how and when to issue “litigation holds” once litigation is reasonably anticipated.
The “Litigation Hold”
To avoid unintended destruction of relevant documents, an employer is required to institute a “litigation hold” as soon as litigation is reasonably anticipated. There is no hard and fast rule as to what constitutes “reasonable anticipation” of litigation. On the one hand, in the employment context, not every complaint made by an employee is an indication that the employee will file suit. On the other hand, a court may rely on hindsight to find that litigation should have been anticipated long before a judicial complaint or administrative charge had been filed. Indeed, under some circumstances, a single complaint to management could trigger the employer’s duty to preserve documents. When in doubt, documents should be preserved and counsel contacted. Courts are unlikely to be favorably disposed toward an employer who irretrievably deletes electronic documents in an ultimately mistaken belief that they were not relevant or that it was “too soon” to have started preserving documents.
A litigation hold requires an employer to take active steps to suspend routine electronic document destruction protocols, and to act to preserve electronic documents that are potentially relevant to a dispute. A company must focus not only on e-mails and MS Word, Excel, and PowerPoint documents, but also on such electronic data as instant messages, network data, internet usage histories, metadata and information from non-networked computers, external storage devices, Blackberries, voicemail, and backup tapes.
A senior level person at the company should issue the litigation hold—providing written notice to all employees who might have documents potentially relevant to the dispute, directing those employees to identify and preserve all such electronic information. Until an agreement is reached with the opposing party or a court determines otherwise, automatic e-mail deletion programs must be stopped, routine document and data destruction procedures suspended, and backup tapes not overwritten or recycled in the usual course of business.
There are other best practices as well that an employer should follow regarding a litigation hold. For example, notice of the litigation hold should be periodically re-issued so that new employees become aware of it and all employees are reminded of it. Employers should also document their compliance with their electronic data preservation obligations, including identifying which persons have been contacted, which equipment has been secured, and which documents and data preserved. Employers must keep in mind that a litigation hold applies equally to the retention of potentially relevant documents that previously were created as well as those that may be created in the future.
Document Retention and Deletion Policies and Committees
The new rules on electronic discovery implicitly encourage every human resources professional and in-house counsel to familiarize him or herself ahead-of-time regarding the company’s computer architecture. By learning the systems, and working with those responsible for them, an employer can best prepare for litigation and minimize costs and delay down-the-road.
A company can reduce the risk of failing to comply with its electronic discovery obligations by forging relationships ahead-of-time among operations, human resources, legal, and information technology personnel, all of whom would be involved with a litigation hold in an employment case. As a starting point, in advance of litigation, the group should work together to establish appropriate electronic document retention and destruction policies. Such policies often allow a company to decrease the volume of information that will have to be sorted through after a litigation hold has been put in place. Such a committee can also be effective in developing protocols for evaluating litigation threats and structuring how litigation holds are implemented.
Penalties for Non-Compliance
Courts may impose severe penalties on an employer who fails to properly preserve electronic documents and data in anticipation of litigation. A federal district court in the District of Columbia recently imposed $2.75 million in sanctions on Philip Morris for electronic discovery violations, including the deletion of relevant e-mails. A violating party also could be required to pay for any additional discovery costs or for the opposing party’s discovery-related attorneys’ fees and expenses. Courts also might give adverse inference jury instructions, meaning that the jury is to infer that any missing electronic documents contained damaging information. Witnesses also may be precluded from testifying about missing information, and in the extreme case, a court might award a default judgment, thereby granting an automatic victory to the opposing party.