Approximately 95 percent of all information is created in electronic form. Less than three percent of that information will ever be converted to paper. Billions of e-mails are sent through the Internet and stored in electronic format on a daily basis. Computer systems often retain documents that otherwise would be destroyed, modified, or difficult to obtain. For those reasons and more, electronically stored information is a critical source of evidence.
Image may be NSFW.
Clik here to view.
That’s particularly true in employment cases. For HR professionals and attorneys on the front line, the document retention and preservation law continues to develop. This article provides a brief outline of existing law and more recent developments, including an overview of the duty to preserve electronically stored information and the consequences that can follow when the obligation is ignored.
Zubulake and the duty to preserve electronic data
The importance of the duty to preserve electronic data was explained years ago in a gender discrimination lawsuit by Laura Zubulake against her former employer, UBS. Zubulake, a securities trader for UBS, sued the company for sex discrimination and retaliation after she was passed over for a promotion and allegedly subjected to improper sexual conduct. After the lawsuit was filed, she discovered that UBS deleted and failed to produce a number of potentially relevant e-mails. Following a request for sanctions, the court outlined the duty to preserve electronic data, which is triggered when litigation is reasonably anticipated.
In the case, the court provided a detailed explanation of the parties’ obligation to preserve potentially relevant documents when litigation is reasonably foreseeable. First, the court made clear that the company must suspend routine document retention/destruction policies and implement a “litigation hold” to ensure the preservation of relevant documents.
Next, the court explained the special duties of legal counsel in the preservation process. Counsel must actively participate in and be familiar with the company’s document retention policies and data-retention “architecture.” To fulfill that duty, attorneys must speak with the client’s IT personnel and interview all “key players” (including HR personnel) to understand how information is stored. They also must ensure that all backup media the client is required to retain are identified and stored in a safe place.
That is not a passive exercise. According to the court, “It is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched.” In the case, UBS’s failure to comply with those basic requirements led to the imposition of monetary and evidentiary sanctions, including an “adverse inference” instruction that invited the jury to consider the missing documents as evidence of wrongdoing. The result: a $29 million jury award in favor of Zubulake.
The case provides a valuable lesson that applies to HR professionals: If litigation is reasonably foreseeable, you must take reasonable steps to preserve electronic data that are likely to be the subject of discovery (the pretrial exchange of evidence). In this respect, a mere “litigation hold” directive is insufficient. Instead, this is a proactive process that may include the suspension of routine document destruction policies and the implementation of affirmative measures to ensure all discoverable data are preserved.
If these measures aren’t taken, courts have (and will) impose significant sanctions, including financial penalties, adverse jury instructions, or “spoliation” claims that may expose the company to further liability. The bottom line is simple: Companies must develop an effective policy for preserving electronic data or face the risk of significant sanctions.
Developing a retention and litigation hold plan
The preservation and production of electronic data can be a daunting and expensive process. Often, HR professionals are the first to receive a demand letter, formal complaint, or even a verbal threat of litigation from an employee. That’s when the obligation to preserve relevant electronic data is triggered.
To avoid problems, the first step is to have a detailed written retention policy that includes specific guidelines for retaining electronic data. In most retention policies, documents are stored and then discarded based on specific retention periods imposed by law. A well-drafted retention policy will require the company to retain documents during this retention period and follow through by destroying the documents when the retention period expires. Such a policy is far more effective than the traditional “keep everything” approach, which retains information much longer than necessary and can expose the company to liability. Under ordinary circumstances, there’s no reason to keep documents longer than the designated retention period prescribed by law.
Once litigation is foreseeable, the company should immediately suspend the destruction of any documents under the policy and institute a litigation hold that preserves relevant electronically stored information. For larger companies, that will require assistance from IT personnel and legal counsel. With all employers, relevant data can be found in obvious places, including individual employees’ hard drives, network files, and network servers. Less obvious places, such as PDAs, voice mail, instant messages, and laptop computers, also must be considered.
It’s critical to identify electronically stored information that is being routinely destroyed as well as backup tapes that contain potentially relevant data. Once this information is identified, it should be secured in its original condition.
An effective retention and litigation hold policy is fortified by communication, training, and collaboration with other professionals. The litigation hold must be implemented by all of the “key players” in the company, including HR personnel. The policy should be distributed in writing and followed up with training and communication so that all relevant documentation is preserved. Employees should be given specific instructions about the proper use of e-mail and other internal communications that are certain to be discoverable at a later date. Without question, e-mail is the most damaging source of evidence in many employment disputes.
As a final step, it’s critical to consistently and uniformly follow the retention plan. If the company deviates from the policy, a court may conclude that it acted negligently and impose sanctions. That’s exactly what happened in the Zubulake case―an HR director failed to implement a retention plan and serious sanctions resulted.
Document retention policies that are followed consistently and in good faith can provide an added benefit. In many jurisdictions, including Wisconsin, an employer can’t be penalized if it destroys documents in accordance with the good-faith application of a document retention policy. If documents are destroyed through such a policy before litigation is foreseeable, the employee can’t argue the employer intentionally or negligently destroyed relevant documents. In that case, the policy provides a “safe harbor” from accusations of evidence destruction, which can be a significant benefit to the company. Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y., 2003).
Bottom line
HR professionals often play a critical role in preserving electronic data when litigation is foreseeable. Ultimately, the consistent execution of a carefully drafted retention and litigation hold policy is the best defense when an employee threatens or commences litigation.
Image may be NSFW.
Clik here to view.
Timothy D. Edwards is a partner with Axley Brynelson, LLP in Madison, Wisconsin. He focuses his practice on federal court litigation and employment law, representing both employers and employees. He also practices business law and represents professionals in licensing disputes. He can be reached at 608-260-2481 or tedwards@axley.com.