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New rules affect how you store and preserve electronic records

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in Leaders & Managers,Management Training,Office Management,Records Retention

by Tracy A. Leahy, Clark Hill PLC

New federal court rules for electronic-records maintenance and discovery took effect on Dec. 1, 2006. The rules govern discovery of electronically stored information in federal civil litigation.

While many states are enacting their own rules, Michigan has not. That means Michigan employers should be in good shape if they follow the federal rules.

Under the new rules, “electronically stored information” is recognized as a category of evidence on the same footing as paper documents or other discoverable information.

Electronically stored information means data that reside on desktop and laptop computers, an employee’s home computer, e-mails, servers, external hard drives, application files, storage and backup tapes, floppy discs, CDs, zip files, flash drives, optical discs, PDAs, iPods, BlackBerries, USB drives, cameras, cell phones, voice-mail systems, I-VOP systems and answering machines.

Impact of the new rules

The rules impose a duty upon organizations, including employers, to identify, collect, maintain and preserve all electronically stored information that could be relevant to litigation.

Consequently, once an employer is either notified or reasonably anticipates litigation, it should place a “litigation hold” on pertinent electronically stored information.

Employers must locate all relevant data and suspend any electronic document destruction procedures, including the routine destruction or recycling of backup discs. Further, employers should establish a chain-of-custody log to document the relevant electronically stored information’s location and condition.

The need to suspend your routine data-destruction procedures (including the rewriting of backup discs) cannot be overstated. Courts have harshly punished companies that have failed to maintain relevant evidence.

Frequently, judges will instruct juries to assume that any missing data support the plaintiff’s position. Such “adverse-inference instructions” are extremely damaging to a company’s ability to successfully defend itself in litigation.

In one notable case, a jury awarded $1.4 billion in punitive and compensatory damages after learning that the defendant overwrote relevant e-mails even after it knew the e-mails would be required in court. The plaintiff’s attorney exploited this misstep by telling the jury that the defendant “hid evidence,” “destroyed evidence,” “lied to the court” and “sought in every way to cover up its wrongdoing.”

Review record-retention policy

Now's a good time to review your policy on document retention. A good policy will:

  • Inventory, categorize and catalog data storage locations and document types.
  • Develop document-destruction schedules based on document type, legal requirements and business needs.
  • Designate a records custodian or records-management team.
  • Educate all employees on the organization’s retention and destruction policies.
  • Implement procedures for ensuring that document destruction can be quickly suspended when necessary.

Bottom line: An active document-retention policy can go a long way toward protecting your company from claims that relevant evidence was willfully destroyed. But your record-retention policy is only as good as its implementation and active enforcement.

Educate employees about your policy and the implications of not following it. And consider creating a litigation-response team to ensure the suspension of routine destruction practices. 

___________________________

Tracy A. Leahy is a Senior Attorney with the Labor and Employment Practice Group of Clark Hill’s Detroit Office. She has represented employers in state and federal actions and has drafted and revised employment policies and handbooks. For more information on the new federal rules, contact her at (313) 965-8533 or tleahy@clarkhill.com.

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