From CBIA News, September/October 2002

Have a plan for purging business documents

Make sure employees know what to keep, trash or shred 

By Bonnie Kreitler

Free-lance writer in Easton

As a few prominent companies find themselves in trouble over questionable shredding of documents, companies of all sizes should take a look at their own document destruction and retention practices. 

Document shredding is legal in many situations. But you might worry that shredding will give the impression you’re guilty of wrongdoing, when you’re not. 

But who can keep all that paper? Besides being too costly, there are security concerns, especially if you collect confidential information such as credit card numbers or employee medical records. 

On the other hand, you can’t simply trash whatever documents you no longer need. Every business faces record-keeping requirements spelled out in local, state or federal laws and regulations that apply to their particular type of business. Between the extremes of saving everything and saving only what is legally necessary, which documents should you keep and which should you throw away?

Unfortunately, “There is no cookie-cutter solution,” says attorney James Bergenn of Shipman & Goodwin in Hartford. “Businesses are too diverse.” 

You need a plan

Some business owners might be inclined to destroy records as quickly as legally possible lest a document come back to haunt them should litigation arise. Bergenn cautions them not to be too hasty. While older records can be used against you, they can also exonerate you, he notes. If you have nothing to hide, keeping records indefinitely could be your best defense against lawsuits by regulators, employees, competitors or customers. “You need to tailor a document retention schedule precisely to your situation and err on the side of keeping them,” he says.

Bergenn notes that even if you have a regular document retention and destruction policy, the mere suggestion of litigation trumps that policy. “If you even smell an investigation,” he says, “don’t wait for a formal notice. Stop destroying records until the investigation is over.” 

The absence of records can make a business look guilty, especially if the records were destroyed after there was a suggestion of imminent litigation. “White-collar litigation is always a gray area,” says Bergenn, “but the destruction of a document is black and white.” The fact that someone destroyed a document can make it easier for a lawyer to make a substantive case. 

“The worst thing is to have no policy at all,” says Bob Johnson, executive director of the National Association for Information Destruction in Phoenix, Ariz. (www.naidonline.org). If you simply destroy documents whenever you’ve run out of space or are moving, or someone just feels like housekeeping, you’re placing yourself at risk. “Then it looks funny when you finally do decide to clean and purge records,” he says.

Satisfying regulatory requirements and avoiding legal grief are not the only reasons for having a good document retention policy, however. Regular document housekeeping saves real money. When office space leases for $15 per square foot monthly, keeping a typical four-drawer file cabinet on-site costs roughly $900 a year. Off-site storage may cost less, but, either way, the dollars add up over the years. 

Getting started

A written document retention policy starts with a schedule of what documents to keep and how long to keep them. Accountants and lawyers often have basic schedules that their clients can use as a starting point. “There are guidelines, but there are no cut-and-dried answers,” says accountant Michael Pyne of Weinstein and Anastasio in Woodbridge. 

For example, he says, the statute of limitations for tax-related documents is generally three years. However, it can go up to six years if there is a 25% underestimation of income, and there is no statute of limitation on fraud. Pyne advises clients to consider the type of business they are in, their management information needs, and any regulatory requirements that apply to the business. 

While you’re thinking about how long to archive specific documents, also consider what is going out with the trash. “Daily trash is a record of your business and must be protected,” says Johnson. This includes things like memos, phone messages or forms discarded because of errors. These incidental or duplicate records often contain sensitive information — such as Social Security numbers, employees’ home addresses, a customer’s credit report — that must be protected. 

Ken Rubin, executive vice president of the records management firm Iron Mountain, which has facilities in Stamford and Hartford, advises that you divide your records into three categories: 

1. original documents that will go into storage for the legally advisable term or as long as they are of business value,

2. things that are confidential or private information that should be shredded immediately; and

3. unofficial documents or duplicates with no privacy value or retention value that can be discarded.
   

Who and where

What to keep and toss is just the first decision, notes Chris Smith, of Shred-It, located in Cheshire. You must decide if you’re going to purge files daily, weekly, monthly, annually or on some other schedule that makes sense for your business. Then you must decide who is going to be responsible for destroying documents — both the daily flow of confidential information and any records that have been archived. 

A very small business might find that a portable shredder from an office supply store serves its needs adequately. As the volume of documents grows or the need to prove that documents were destroyed becomes important, an outside shredding service may make more sense. For example, Shred-It provides locked bins where businesses can toss their daily document detritus or regularly purged files. On a schedule set by the business owner, Shred-It’s bonded employees pick up the bins, carry them out to mobile shredders, and send the business a certificate of destruction. 

Document storage takes space, and office space costs money. At some point, you need to punch a calculator to see if it makes more sense to store documents off-site. Rubin points out that big businesses are not the only ones taking advantage of off-site records storage. More than half of their clients, he says, are small, local businesses looking for inexpensive document storage. It costs less than $3 per cubic foot per year to store documents off-site, he notes, and a small banker’s storage box is about 2 cubic feet. That means a business can store the contents of a typical four-drawer file cabinet off-site for about $24 a year. 

Rubin says there is a misconception that once the records go off-site, they become inaccessible. Not so. When records are sent to Iron Mountain, for example, the business owner completes an inventory index, which goes into a database index that’s available 24 hours a day via the Internet. A customer who needs a record simply goes online and identifies the needed form, and the box is returned to them. Records remain available on demand until they become eligible for destruction and the business has approved their destruction or continued storage.

Putting it all together

Anita Castore, president of the Stamford–White Plains chapter of the Association for Records Management Professionals (www.arma.org), suggests touring other businesses to see how they manage the process. “Why reinvent the wheel,” she asks, “when you can find out what other people in businesses like yours do themselves?” They might share their document retention schedules, recommend helpful books, give budgeting advice, and offer ideas for employee training. She also suggests taking a class in the topic at a local business college or joining a professional group like ARMA.

Castore advises that once you have a document retention schedule and a plan for implementing it, make sure company management and legal advisers have agreed to it. Unless you’re the business owner or senior executive, you’re also going to need management approval for budgeting and staff support. The best plan, Castore notes, is no better than the people implementing it. Employees must be trained and someone must be responsible for following up to make sure the plan is implemented correctly and consistently. 

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