By Cynthia Courtney, Esq., VP, Advisory and Engineering
I recently made a presentation about e-discovery budgeting at a meeting of a law firm’s litigators. One of the best questions came from a man who is in his fifth decade of trying cases. He asked this:
A client has just come to see me about the new company she is forming. She would like to know what steps she should take early on so that she is prepared in the (hopefully) unlikely event that litigation occurs and she must produce electronically stored information.
My first reaction was “how often do we have the luxury of giving this kind of advice to clients at the time a company is formed?” The answer to this man’s question depends on the nature of the client’s business, whether it operates in a regulated industry, or whether the type of business is litigation-prone. Grappling with all of these questions can seem overwhelming; however, there are some basic points that can and should be considered early in the planning stages.
It is probably a safe assumption that the new business will use e-mail, basic office programs and some applications. Therefore, IT help will be needed to manage the environment. If the client plans to hire an IT professional, she should take that step early (or, if outsourcing, retain IT help early). The IT professional should be at the table for the selection of applications and should be allowed to plan the IT infrastructure, instead of letting it grow “like Topsy”—in other words, like many IT organizations grow.
Your new company client likely won’t have a record retention policy on Day 1, or maybe during the first year. Nonetheless, the company will have key records such as contracts, purchase orders, HR intake forms and real estate documents. Establishing a rubric for storing these key documents, including versions and iterations, will get things off to a good start. No specialized applications are needed. Establishing uniform naming conventions is a great start. For example: CONTRACT_XYZ Corp_103112 denotes a contract with the XYZ Corporation signed on October 31, 2012.
It may seem like a luxury, but the new company owner will never regret appointing a person or committee to be on point for records management. If hiring a professional records manager is not in the cards, give the responsible person the tools (such as training and a membership to ARMA) to do the job.
Records management programs need not be complex, especially not at first. A basic policy and program can be put in place that becomes more robust over time. Initially, create a records management program that does the following:
1. Defines a “record” for retention purposes. Only “records” need be retained. An e-mail setting up a social lunch is not a record and should not be defined as such.
2. Establishes legal retention periods (arising from applicable statutes and regulations) as well as retention periods for business records not covered by legal retention requirements;
3. Addresses e-mail as a “container
4. Considers business need;
5. Secures input from Legal, IT, Compliance, and business units.
6. Specifies the life cycle for records that includes archiving and destruction of paper and permanent deletion of electronic records.
Using “the Cloud”
If your client decides to use cloud providers, for example, for payroll or HR, make sure that you have the contractual right to obtain data and reports in the event of litigation. Include service level agreements that impose time requirements on the cloud provider to supply the needed information.
Understand the litigation that companies in your field experience and the types of records that must be collected for such litigation. For example, most companies have some amount of employment litigation, and it is common for the personnel file to be produced. Automate personnel transactions and make it easy to extract reports from the HR system. Similarly, if an inventory or accounting system is at the core of the business, buy a system that allows reports to be run and information to be extracted with ease.
Appoint a litigation “SWAT” team that can quickly gather information for litigation. The team can include in-house or outside counsel, an IT professional, and contacts in each business unit.
Start-up company owners have plenty to worry about, but in this hypothetical, the newly-minted owner has had the presence of mind to ask her lawyer to do some thinking about litigation and records retention. Giving some thought to these basic issues will put the company on a good footing for Day 1 and set the stage for strong policies and protocols going forward.