New Record Keeping Policies Now A Business Imperative

Employers should take a close look at their record keeping policies in light of recent amendments to the Federal Rules of Civil Procedure.  Following are the highlights of these significant changes:

• Employers must now begin to preserve paper and electronic documents at the very first sign of a potential lawsuit.  For example, if an employee contacts the human resources department  and complains of discrimination, the company must immediately begin to preserve all paper documents, e-mails and computer files relating to the employee's complaint.
• If your company is sued, the company's "electronically stored information" may now be part of the discovery process.  This means that you may have to produce all e-mails sent within your company - even inappropriate e-mails that employees may forward to co-workers and personal friends.  These inappropriate e-mails may expose your company to greater risk in the lawsuit.
• Within a short time after the lawsuit is filed, your company will be expected to produce a plan for retrieving and accessing the electronic documents related to the lawsuit.  If your company does not make an effort to create this plan, the judge may impose penalties.

What actions should employers take in response to these legal changes?  We suggest the following steps:

• Establish a company policy that e-mails are for business use only.  When you become aware of a violation of the policy, take appropriate action.
• Set up a procedure for the quick retrieval and preservation of paper documents, e-mails and computer files.  This procedure must be able to segregate, store and protect information from destruction without interrupting the normal course of your business.
• If your company routinely destroys or purges electronic information, make sure you have a policy that describes the process and the legitimate business reasons for destroying these documents.
• Make sure that you understand exactly how your company data is stored and maintained.  Recently, Morgan Stanley was hit with a $1.5 billion judgment largely because the company failed to produce backup tapes containing potentially relevant information and told the court that no such tapes existed.
• What if your computer system has a melt down?  Keep in mind that the Federal Rules of Civil Procedure amendments include a "safe harbor" provision.  This safe harbor provision applies to companies when information is lost as a result of the routine, good-faith operation of an electronic information system.  However, regular purging of electronically stored information can be viewed as negligent by the courts if an employer can not establish it is done in good faith.

Some experts estimate that even the most modest business may have the electronic storage capacity equivalent to 2,000 four-drawer file cabinets when you take into consideration the typical storage capacity on the average computer.  At the other end of the spectrum, large businesses generate millions of e-mails every day.  The new amendments to the Federal Rules of Civil Procedure create a potentially huge discovery burden on businesses to track down, gather and produce all relevant electronically stored information in an extremely short amount of time.  This burden can be minimized if proactive steps are taken to regulate, preserve and track electronic information.

If you would like to discuss the subject matter of this article or any other employment-related issue, please feel free to contact Wessels Pautsch & Sherman P.C. Attorney Rebecca L. Dobbs at 630.377.1554 or email her at redobbs@stch.w-p.com.