Establishing a Document Retention Plan

Peter R. Spanos

August 2005

Introduction1

This article discusses the value of a document retention plan and outlines a six-step process for designing a DRP. Additionally, a model DRP is provided at the end of the six-step process discussion. The model is tailored specifically for businesses within the construction industry. However, no representation is made that these are specifically applicable to one company’s particular circumstances and projects. The recommended retention periods are based primarily on federal regulation and laws and do not sufficiently consider any specific state statutes. Therefore, a DRP should be specifically tailored for an organization in conjunction with legal counsel and technical professional staff.

Further, it is important to note that document retention issues are critical to operations in at least four ways: (1) compliance with government requirements; (2) preservation of records needed to defend the company or resolve disputes; (3) preservation and organization of records to assist company in pursuing claims and locating materials quickly and (4) destroying unnecessary or obsolete documents.

Defining a DRP and Understanding Its Value
A DRP identifies which documents a company should maintain and sets guidelines for the length of time the documents should be kept. It establishes a schedule for the routine review, retention and destruction of documents generated in the course of business.2 A DRP provides the following benefits:

Promotes business efficiency. By allowing the routine destruction of useless documents, a DRP reduces the cost of storage space and filing equipment. A DRP also enables employees to locate documents quickly and efficiently, and that decreases the time spent handling and retrieving documents.

Provides protection in litigation. There is a growing burden on businesses to maintain records for longer periods of time. During the discovery phase of a lawsuit, organizations are often required to produce numerous records. Failure to produce the requested documents can lead to negative consequences such as notes
1 The following resources were used to prepare this article: 1) Guide to Record Retention (William A. Hancock, ed., Business Laws, Inc. 2004); 2) NFIB Legal Foundation. "Small Business Guide to Document Retention.”
2 NFIB Legal Foundation. "Small Business Guide to Document Retention.” p. 3.
3 Guide to Record Retention (William A. Hancock, ed., Business Laws, Inc. 2004), p. 101.002.
4 This suggested time frame includes a one-year safeguard since, as discussed in the section on accounting records (page 60), most states provide a six- to 13-year statute of repose for bringing claims alleging construction defects.
5 The time runs from the date the action accrues, which varies depending on the governing statute. These dates also can be impacted by a plaintiff’s disabilities and may be subject to other exceptions. It is strongly recommended that you seek legal advice to determine applicable periods of limitation.
6 The period of limitation provided here is for general contracts. The statute of limitation for breaches of other specific types of contracts, such as an action on bond or for sale of goods under the UCC, may vary.
7 The statutes of repose provided are for causes of action relating to improvements to real property. Most of the statutes begin to run from the date of substantial completion. An additional year is recommended for the retention period, and it is strongly recommended that you seek legal counsel to determine applicable limitation periods.
8 This retention period may be extended by contract.
9 Documents listed under each category have been organized based on the length of the retention period.
10 Though the federal statute that governs payroll records requires employee information to be preserved for at least three years, the time period has been extended based on IRS specifications.