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Katie Nussle
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knussle@thompsoncoe.com

Related Practice
Where Angels Fear to Shred
02.08.02

Record-retention policy. While not exactly the most earth-shattering topic, it's one that, thanks to the latest Enron document-destruction debacle, has risen to the forefront for employers nationwide. Many business people, having read or watched the countless news stories detailing Enron's massive document-destruction campaign, wonder what their companies can do to avoid a similar fate, especially in view of the fact that document shredding has become an ordinary and customary business practice in today's paper-intensive world.

Employers should have a formal, written record-retention policy. This policy can insulate a company from liability for improper document destruction if the company can show it had a standard retention and destruction policy and that documents were destroyed in conformance with that policy. Absent such a policy, a company can readily be accused and convicted of improperly or unlawfully discarding evidence. In legal terms, this is known as "spoliation" -- an evidentiary doctrine that allows judges and juries to draw an adverse inference from a party's document destruction. The premise is that the missing documents must have been harmful to the party that destroyed them; otherwise, that party would have tried to safeguard and produce the documents.

A legally sustainable record-retention policy defines the type of records or files to be maintained, the maintenance period, destruction methods and procedures, and the custodian authorized to approve and perform the destruction. Companies should also, in conjunction with their policy, maintain a centralized log or schedule showing the types of documents destroyed, the basis for destruction, destruction dates and the destruction custodian. It is imperative that someone at a fairly high level in the company be designated to monitor and enforce compliance with the record-retention policy.

Defining the document-maintenance period can be especially tricky for employers because of the extensive number of federal and state retention requirements imposed by government statutes and regulations. For example, some federal civil rights laws require employers to retain job applications and other personnel records for a one-year period from the date the record is created or the personnel action is taken. Employers who fail to comply with these types of retention requirements face serious consequences, including fines and penalties. Documents would have supported the employee's discrimination allegations.

Employers who engage in improper document-destruction practices may also find themselves on the receiving end of a wrongful discharge lawsuit. While Texas law does not recognize a general whistleblower cause of action for private-sector employees, it does provide protection for employees who are terminated for refusing to perform an illegal directive or order. For example, if an employer subject to a government subpoena orders an employee to destroy subpoenaed records, and the employee is fired for refusing to do so, the employee would be entitled to sue his employer for wrongful discharge, obtain reinstatement, recover lost wages, benefits and attorney's fees.

Document destruction is a serious matter laden with dangerous traps for the unwary business person. Training, planning and coordination are the keys to avoiding those traps. All company personnel, regardless of their position, should be made aware of the company's record-retention policy and procedures and instructed they may only discard or destroy data or documents in compliance with those directives.

Employers should exercise extreme caution any time the company is about to engage in any kind of structured or organized document destruction. Employers about to embark on this type of endeavor should consult their counsel and verify they have not received, and are not likely to receive, one or more of the following: a subpoena, informal inquiry from a government agency, formal government investigation or inquiry, internal complaint by a disgruntled employee, discrimination charge filed with a government agency, demand letter from an employee's attorney or an employment lawsuit.

If the employer or its counsel believes any of these events have occurred, or are likely to occur, counsel should promptly and carefully evaluate all documents slated for destruction to determine what, if any, documents are relevant to the incident. All identified, relevant documents should then be reproduced and maintained by counsel in a separate backup file. In no event, however, should the original flagged documents be destroyed until the investigation or lawsuit has been concluded. Only then, and with the blessing of counsel, is it appropriate to resume ordinary and customary document-destruction practices.