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Components of a Legally Sufficient Records Retention Program

The procedures for developing a records retention and disposition program have been documented in a variety of different publications. In order for a records retention program to be legally sufficient, however, much more is required than merely ensuring that records are maintained for the period required by various statutes and regulations; proper procedures must also be followed in developing and operating the program. The following factors must be included in an overall records retention and disposition program.

1. The records retention program must be systematically developed. A records retention program is systematically developed if the program is developed in the ordinary course of business, the various records values have been properly determined, the program is documented, and the program has been properly approved. This requirement ensures that all retention requirements, including administrative, fiscal/tax, legal, research, and historical have been provided for in the program. It also establishes the fact that the retention program has been well conceived and executed over a period of time, rather than developed to deliberately destroy unfavorable documentary evidence prior to litigation or government investigation.

2. The records retention schedules must cover all records, including all reproductions. Records retention schedules which provide for only the original or "record" copy in paper form are inadequate to fully protect an organization. The "Uniform Photographic Copies of Business and Public Records As Evidence Act" (UPA), enacted by the federal government and almost all states, specifies that reproductions of records have the same legal significance as the original and may be used in place of the original for all purposes including evidence. Many records retention programs do not contain provisions for "information copies" or "personal copies" of records which may be maintained by one or many individuals in the organization. During litigation or government investigation, these copies may be subpoenaed and used against the organization, even though the original records were properly destroyed under the records retention schedule. Personal copies of records which were not destroyed may be particularly important during government investigations related to anti-trust or price fixing.

3. The records retention schedule must also include provisions for records maintained on other media, especially microfilm and data processing media. Most records retention schedules only provide for paper records. Some schedules specify when the records should be microfilmed and the original paper destroyed. Provisions should also be made in the records retention schedule to cover microfilm records. Rarely, if ever, should microfilm copies of business records be maintained "forever." Similar provisions should be made for data processing records, especially for original or back-up records which are periodically updated or replaced.

4. Written approvals must be obtained for each records retention schedule and for the entire program. Upon completion of each records retention schedule, one version of the schedule must be reviewed and signed by the department or section manager responsible for those records, the legal counsel, and the tax manager. In addition, the entire records retention program must be signed by the chief executive officer, attorney, and tax manager. These approvals again indicate that the records retention program was systematically developed in the ordinary course of business, instead of in anticipation of litigation or government investigation. Copies of these approvals should be kept indefinitely.

5. Records should be systematically destroyed as specified by the records retention program. Once a program has been approved, records should be systematically destroyed under the records retention program, in the ordinary course of business. Generally, the procedures should specify that, once each year, the records manager provide each department, the legal counsel, and the tax manager, with a listing of records that can be destroyed. After review, destruction can be halted for records related to litigation or government investigation, or for those which are still needed by the organization; other records can then be destroyed in an orderly basis at the designated time. Destruction of records in a haphazard or selective manner, even for records permitted under the retention schedule, creates the impression that the records retention program has not been properly implemented. (Accurate details of the files in storage will assist with this process.)

6. Program controls and management must be provided. The records retention program will not function on its own. At least one person in the organization must be responsible for managing the records retention program to ensure that the program is up-to-date and that destruction proceeds in an orderly manner. This person should also be very familiar with the background and operation of the program in order to testify in court, if necessary, regarding the program.

7. Procedures must be provided for the suspension of records destruction in case of foreseeable, pending, or actual, litigation or government investigation. When the organization receives a notice of pending or actual litigation or government investigation or it appears reasonably foreseeable that such litigation or investigation will take place, the destruction of records must cease immediately. Otherwise, the company could be liable for obstruction of justice, contempt of court, or other problems discussed later in this article. Generally, any staff member who receives any information regarding potential litigation or government investigation should inform the legal counsel or chief executive officer immediately. Notice should then be provided to the records manager, all records custodians and other related personnel to immediately cease the destruction of all records, since it is often initially unclear which records will be involved. As more information becomes available to legal counsel or the tax manager, permission may be granted for the destruction of certain records under the program which are outside the scope of the litigation or investigation. The legal counsel and tax manager should be involved in approving all "Request for Destruction of Records" forms in order to facilitate this process.

8. Documentation relating to the development and implementation of the records retention program, including records retention schedules, procedures, changes in procedures, approvals, legal research, and listings of records destroyed must be maintained. Documentation related to the records retention program is necessary to prove the existence of a systematic operation of the program. The records which document the development of the program, original signed retention schedules, and listings of records destroyed, are critically important as evidence to indicate that the records in question were destroyed in the ordinary course of business. The records manager will generally be required to appear in court with the appropriate documents and testify as to the development and operation of the program.

The information presented above highlights the need for storing your electronic documents in a secure facility for the long-term.  FileVault can assist you in securing your data for future use.