Trying to Put Together a Records Retention Program?

Dorothy Amundson, CIC, PWCA
We are frequently asked about retention requirements from our design firms who are drowning in it.  Plans, reports, schedules, requests for information, technical calculations, memos and other correspondence are scattered across a  variety of mediums: computer discs, blueprints, photographs, and the old staple:  paper — reams of it. Once a project is complete, the question of what to do with all these records arises. Should a firm keep them? If so, how long  should the firm keep them? And, which records should it keep? The answer  is…it depends.

 A Matter of Liability – The issue of how long to retain records usually revolves around the need to defend your firm against charges of negligence and professional liability. Simply put, a consulting firm that provides a professional service may find itself sued for negligence long after its work is done and the project completed.  These claims can come years –sometimes decades – later and involve problems that have more to do with poor maintenance and upkeep than initial design errors. Whatever the time lapse, your firm can still be the principal target.  Regardless of why a claim occurs, a firm’s defense will largely rest on its ability to produce records of what actually happened. That is especially true if the claim occurs years after  project completion as there are fewer other means (e.g., witnesses) to confirm your side of the story.  The law has traditionally offered design firms some protections against “stale’” claims – those started so long after the work was completed that the firm couldn’t be held reasonably responsible. These protections are usually embodied in two areas of law: statutes of limitations and statutes of repose.

Statutes of Repose – Statutes of repose differ from statutes of limitations in that they set definite time limits under which a cause of action can be brought against the design firm. Under a statute of repose, the time limit starts either at the completion of services or at the substantial completion of construction. Once the time elapses, all causes of action are barred, no matter when the defect is discovered. Statute of repose time frames vary from state to state, with some as short as four years and others as long as 15. California’s statute of repose is 10 years from the date of substantial completion.  We advise our clients to maintain records for 11 years after the date of substantial completion to allow for this statute.

Record Retention Policies – Because of their concrete time limits, statutes of repose offer design firms a stronger level of protection against stale claims. They also help dictate the minimum amount of time that firms should retain their records. Generally speaking, firms should keep records for the length of repose plus a year for a safety margin. Insurance  companies report that nearly all claims are filed within nine years of substantial completion. Knowing how long to keep project documents, however, is only half the battle. The other half is determining what to keep.  First, a firm does not have to keep everything. In fact, it is often best that they don’t. The reason is “discovery.” Discovery is a legal process that allows opposing attorneys to get access to all of a firm’s records relating to the project. “All,” in this case, means every plan, every schedule, every memo, every piece of correspondence — including e-mail — in short, everything that a firm or its employees has kept, whether it knows that it has the information on file or not. Discovery can turn up some ugly surprises if a firm has not taken a consistent and systematic approach to records retention.

For example, records can be scattered among several locations. They can include drafts of plans that were later discarded or — true dynamite in an attorney’s hands — copies of informal communication among team members containing inflammatory remarks about the quality of work being performed. The solution is to develop and enforce a company-wide records retention policy that clearly states which records are to be retained, when they are to be destroyed and how and where records are to be stored. Make sure your records retention plan is consistently applied from project to project. You don’t want to be caught doing a little too much “house cleaning” on that one project that  went south.  Courts have shown that they are willing to accept  a  company’s  explanation  that  records were  destroyed  in  accordance  with  company policy only if the firm can show that its policy was consistently implemented. It is critical that all employees know, understand, and are held accountable for implementing your firm’s records retention policy.