Record Retention in an Electronic World: Time to Clean House?

February 7, 2007

Most Human Resource professionals tend to be pack rats. When documentation is typically hard to come by, no one in his or her right mind would put it in the shredder. In fact, the inclination might be to keep it forever. Recent changes in court procedures may require re-evaluation of company record retention practices, particularly when it comes to "electronically stored information". It’s time for all employers to get a handle on the sources of electronic information and develop a record retention policy for its preservation, production and destruction.

On December 1, 2006, the Federal Rules of Civil Procedure were amended to address court procedures for disclosing electronic information during the discovery phase of litigation. The new court rules begin to apply to a company when litigation is "reasonably anticipated". At that point, a company must put a "litigation hold" on its electronic and other records that may be discoverable in litigation. Companies that take this step will be protected against court sanctions, so long as they take reasonable steps to protect and preserve information.

Once litigation is commenced, the new rules require lawyers representing both sides to meet and discuss the production of electronic information including its format and preservation, difficulties in accessing, and costs of providing. If the company can show that the information is not "reasonably accessible" because of cost or burden, it may avoid production unless the employee can show it has good cause. A court may require the company to produce it anyway, but may require the employee to bear some of the expense. 

Most discrimination-based lawsuit are brought in federal courts so this has a direct impact on human resources as it relates to personnel records and most importantly e-mail communications. How these issues can turn into a disaster for employers was highlighted in Zubalake v. UBS Warburg, a pre-federal rule amendment case involving a former employee’s gender discrimination claims against a securities company. The former employee demanded that the company produce e-mails many of which were backed up or stored in a manner that they were not readily available without the employer incurring significant expense.

In order to respond to the e-mail production request, the company would have to restore and review 77 back up tapes at a cost of over $160,000.00 to restore and $100,000 to review. The court ordered the company to do so and to bear 75% of the cost of restoring and all of the cost of reviewing. After producing the some of the e-mails, the court determined that important information was missing because the company had failed to adequately safeguard and produce e-mails from a key player in the company’s decision making process concerning the former employee’s treatment. 

As a sanction for its failures, the court instructed the jury that it may conclude that the e-mails that were not produced by the employer may have been deliberately deleted and could have contained information supporting the former employee’s claims of discrimination. The jury awarded the plaintiff $29 million dollars in damages.