Westchester attorney Lisa Fantino offers ideas for corporate electronic records management

It seems everyone is going green these days and more and more corporate transactions and correspondence are being sent via email, text, and yes, social networking sites.  The days of corporate paper trails are gone (I guess the boys at Enron would be happy about that!).  However, that does not free corporate responsibility for records maintenance.

Companies, large or small, are best served when they can support their position from the smallest contract to the largest policy infraction, such as a charge of discrimination, SEC fraud or import/export violations.  So, what should a business do to guard against coming up empty handed when the need arises?

1.  Formalize an e-records policy – That may sound scarier than it need be.  Simply state in one paragraph or less what you intend to do with electronic records.  The policy statement should define exactly what types of records will be covered:  email, .doc files, webpages, etc.  Then with each item indicate how long you will retain copies of these items and how they will be stored, for example:  will they merely be stored on your server or hard drives or will you have a back-up satellite storage system?

2.  Plan ahead for possible litigation – No one enters a business deal with litigation in mind but if you are in business long enough, you will face a lawsuit of one kind or another.  So, how long should you realistically keep electronic files?  A good rule of thumb may be to look to your state’s statute of limitations on certain actions involving your type of business.  A statute of limitations is the time frame in which you can bring a particular type of lawsuit.  Therefore, if you are a New York business, you should know that the statute of limitations on a breach of contract action is 6 years.  So you might want to retain any efiles pertaining to a contract not just for six years but for at least a few years beyond its expiration or the last transaction involved with that contract.

Employee actions are another matter.  If you have employment contracts with any of your executives or employees, then the statute of limitations for contracts would apply.  However, if you are concerned with possible issues of discrimination, you should know that the statute of limitations on discrimination actions vary widely from a short 180 days under federal Title VII to several years under certain state laws.  In a state like New York, which has an agency dealing with such claims, it may be as long as 300 days but under the New York Human Rights Law, a claim may be filed up to three years after the occurrence.  In instances involving possible discrimination, protect yourself and retain records for an appropriate amount of time for your state.

3.  Instruct your employees on e-records maintenance – A policy is no good if it is never implemented.  Instruct each and every employee on what should be done with email and electronic records under the guidelines laid out in your E-Policy.  Explain the difference between an email of substance (such as one discussing/negotiating a contract versus one merely setting up a teleconference date).

4.  Anticipated litigation – parties who willfully and knowingly destroy electronic evidence when litigation is anticipated or has already been initiated face great penalties for so-called “spoliation of evidence.”  Most states have statutes against the destruction of evidence and will impose heavy fines if a party is found guilty.

5.  Manage risks and reduce costs – Just as with paper files, electronic files also take up space, sometimes just in cyberspace, and the storage of them can be just as costly.  Understand your risks of litigation and plan accordingly when setting your storage policy.

6.  Secure destruction of data – Efiles in the wrong hands can be detrimental to anyone so be sure that once data is destroyed that it will be destroyed effectively.  Deleting the file on your hard drive or server is not sufficient.  Efiles also need to be electronically shredded and discs needed to be physically shredded.

I understand that in this fast-food, life in the fast-lane, society, Efile issues run second to operating your business in a tough economic climate but in this case a byte of prevention is truly worth a pound of cure.  Make it efficient and easy to use and this policy will be worthwhile toward meeting your business goals.  And as always, consult your attorney when establishing new corporate policy.

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