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A Document Retention Policy Can Save Time And Money

A Document Retention Policy Can Save Time And Money
By Missy Zane

In the office, some people are pack rats and cling to every scrap of paper that comes their way. Others pitch everything without giving it so much as a second thought. But attorney Christopher Young of Columbia’s Business & Technology Law Group would urge business owners to find a middle road and never deviate from it.

 “Developing a document retention policy may sound like something managers and business owners can put at the bottom of their to-do lists and leave there forever,” Young says. “But if there’s a legal problem, or if the company is audited by the IRS, the one memo that was thrown out or the one e-mail that was deleted could have saved the company thousands of dollars.”
While document retention plans are not required by law, they are recommended as a best practices policy, Young says. And once the policy is in place, he says it should be distributed and applied consistently.

Developing A Policy
 Document retention needs vary from industry to industry, Young says, so understand your profession’s requirements before you begin writing your policy. Once you’ve identified your legal and business requirements, here are some suggestions for developing a document retention policy:

  • Create schedules and methods for archiving and maintenance. Also create schedules for document destruction.
  • Consult your attorney, accountant, human resources professional and others. They can tell you which documents you need to keep and which you can destroy.
  • Consider setting up centralized controls and systematic enforcement.
  • Train your employees and contractors so they understand the policy and make it part of your employee handbook. Then ask your staff and contractors to sign off on the policy.
  • Set objective deadlines and criteria.
  • Follow your policy always. Don’t wait until someone sues you.
  • Provide a documented rationale for each part of the policy. Assume you’ll have to defend yourself later and save the work papers.
  • Document everything — the policy, the implementation and the enforcement.

 Your policy should include...

  • A statement of purpose
  • A definition of records and documents, including those created electronically
  • Exceptions to the policy
  • Schedules of what is to be retained by whom and where the documents will be stored and for how long.
  • Documentation of which documents were destroyed and when and how they were destroyed. Your policy should also stipulate that management must approve the destruction of documents.

Young suggests setting and enforcing penalties for noncompliance with the policy. If you’re being sued, he adds, suspend the policy when litigation begins.
Getting Organized
 All those documents you keep will do you no good if you can’t find them. Young says your archived and retained documents should be...

  • Indexed
  • Searchable
  • Organized in a logical, easy to understand way.
  • Encrypted (be sure to store the passwords)
  • Have limited access
  • Managed (the easiest way is to use document management software.)

 He also suggests segregating and marking privileged, confidential and trade secret information.

What Should You Keep?
 Every federal agency has its own requirements for document retention. Here are a few examples.

  • The Federal Department of Health and Human Services requires that proof of citizenship and work visas be kept for three years after employment begins or for one year after termination. 
  • The Fair Labor Standards Act requires three years of payroll records and two years of employment and earnings records.
  • The Maryland Wage and Hour Law requires that employment records be kept for three years.
  • The Age Discrimination in Employment Act also requires that records be kept for three years.
  • The Family and Medical Leave Act requires that records be retained for three years and that medical records must be kept separate from personnel files. The records must be available if the Department of Labor asks to see them.

Never Say Goodbye
 Young says some documents should be kept forever. Never say goodbye to documents...

  • Related to the formation and maintenance of a corporation, partnership, LLC or other entity through which you do business. Your articles of incorporation or organization, informal actions, meeting minutes, stock ledgers and transfer documents should be kept indefinitely.
  • Documents relating to trade secrets should also be kept indefinitely. Also remember that patent rights last for 20 years; a copyright is for life plus at least 70 years, and trademarks last for 10 years and are renewable.

Remember Your Computer
 All of those computers in your office also contain documents that should be retained. Data files, word processing files, e-mails and image files are all considered documents.

 While similar principles apply to both paper and electronic documents, there are additional considerations for the contents of your computer, Young says.

 For instance, the media can deteriorate. And “lighting a match won’t make it go away,” Young says. Remember, too, that “hitting the delete key is not final.”

 Be aware of E-laws, he says. Among them: The Uniform Electron Transactions Act, E-Sign, Uniform Computer Information Transactions Act and the proposed Maryland Electronic Postmark.

 How do you destroy electronic documents? Young suggests physically destroying the media — burn the tape, drill holes in the hard drive, break the CD or DVD. “If you’re trying to destroy it,” he says, “get the job done.”

 And how long should you keep electronic documents? “Seven years will satisfy most laws,” Young says.
 “Retaining the necessary documents can save a business owner a tremendous amount of time and money,” Young says. “And once the policy is in place, it will become just as routine as backing up the computers or making sure all the lights are off and all the doors are locking before you leave the office.”


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