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The Electronic Time Bomb on Your Desk

by Albert L. Vreeland

Recently, your job as Shepherd of All Things Employment became a lot more complicated (and legally risky) — for reasons you may not even be aware of. On December 1, 2006, the Federal Rules of Civil Procedure were amended to include specific provisions for handling electronically stored information. That may sound like a problem for your lawyer, not you, but don’t be fooled.

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The old days: No shred, no foul
The Federal Rules of Civil Procedure govern how we exchange information with our opponents in a lawsuit. Even before a lawsuit is filed, you have an obligation to preserve information that may be relevant if you have reason to expect that a lawsuit may be filed (based on a government inquiry or a nasty letter from a lawyer).

In the dark ages, that was simple. You sent out a memo instructing everyone not to throw away or destroy anything important. When the lawsuit arrived, you made photocopies of everything and gave them to your lawyer. Pretty straightforward.

More data than you can hit with a stick
Then Al Gore invented the Internet, and things got complicated. Today, more than 95 percent of business information is generated and stored electronically, and more than half of that never is printed in paper form. Even when it is printed, the paper version contains only a fraction of the information contained in the electronic form — which often includes data about when, how, and by whom it was created, modified, viewed, transmitted, and deleted.

To further complicate matters, the same document may reside in several locations in several different formats. It can be on desktop computers, laptops, network servers, handheld devices, flash drives, or backup tapes, and the list grows longer every day. Each of those sources may contain different information about how the data has been handled and changed over time. Every time a document is opened on one of those devices, the old information is altered and new information is added. The amount of information available is staggering.

In recognition of this complex reality, the Federal Rules were revised. When you suspect that you may be sued, it’s no longer enough to print a copy of critical e-mails and put them in a file. You now have a duty to preserve the information in its various electronic formats. If you don’t take adequate steps to preserve the data, it may cost you. A USB-AG equities trader recently scored a $29 million verdict in a discrimination lawsuit, largely because the court faulted the employer for not taking appropriate steps to preserve e-mails important to the lawsuit.

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It’s now or never
If you wait until you’re sued or even when you first suspect a lawsuit, it will be far too late. There’s too much electronic information in too many places to try to locate and freeze it when you get your first nasty letter from an employee’s lawyer. You have to plan now for how you’ll react when the day comes (and it will come).

The first step is to meet with your IT personnel or vendor and inventory all the possible sources of electronic data. Remember legacy systems (old systems you don’t use anymore that still have information on them). You also should map how electronic data flows through your system (from desktop to server to backup tape). Then develop a litigation plan that identifies who is responsible for what when the proverbial fan is hit. Make sure your IT personnel understand the importance of that — they inevitably have other priorities which (they think) are more important.

The second step is to develop a document-retention policy that sets destruction schedules based on the type of document, applicable legal requirements for the document type, and the realistic business need for the document. When implementing the policy (that is, trashing stuff), remember that the same data probably resides in several places and needs to be removed from each location or else it isn’t really destroyed. Finally, make sure that document-destruction procedures can be suspended quickly when the lawyers call.