To Toss or Not To Toss: Does Your Business Have a Document Retention Policy?

A document retention policy (“DRP”) provides for the systematic review, retention and destruction of documents received or created in the course of business.  A DRP identifies documents that need to be maintained, contains guidelines for how long certain documents should be kept, and will save valuable computer and physical storage space.

Why Does Your Business Need a DRP?

A DRP will increase business efficiency by: (1) aiding in destroying useless documents that will free up valuable storage space; (2) allowing quick retrieval of important documents when needed; and (3) reducing the time spent in handling documents.

A DRP that is consistently followed will significantly help in prosecuting or responding to any lawsuit.  Not having the key document(s) can often mean the difference between winning and losing.  For example, if another business owes your business money and you are forced to sue to collect, it will be nearly impossible to win the case unless you have documentation of the debt.  A DRP will help to identify the key documents that you need to keep, such as evidence of debts owed to your business.

Likewise, in responding to a lawsuit, a business with a DRP is much better equipped to defend against potential claims. If faced with the prospect of litigation, or if you are aware that litigation is likely, documents that are relevant to the pending or potential litigation must not be destroyed.  Without a DRP in place, how will your business ensure that it has notified employees to suspend destroying documents relevant to the lawsuit?  Intentionally destroying documents relevant to pending or future litigation (which the courts refer to as “spoliation”) can also severely undermine your business’s position in a lawsuit.  If the other side requests a document that you cannot provide because it was destroyed, then a court or jury may be permitted to conclude that the destroyed document contained information detrimental to your position.  The key exception to this rule is when the destruction of the document was reasonable.  Having a clear and consistently enforced DRP will help tremendously in convincing a court that the destruction of a document was reasonable.

Further, many documents must be kept for a specific period of time under various federal, state or local laws.  It is important that every business evaluate the laws and regulations that are applicable to their business and that the proper documents are retained for the required period of time.  A DRP should address how long the following records are kept: (a) Accounting and Corporate Tax Records; (b) Bank Records; (c) Payroll and Employment Tax Records; (d) Employee Records; and (e) Legal Records.

Contact the Business Law Attorneys at Skufca Law at 704-376-3030 for more information on how to implement or update a DRP for your business or to schedule a consultation.