When you look at the recommended retention times in a document retention policy you will see time frames like three years or seven years. For employment records you’ll see recommendations of seven years after termination.
I’m not an attorney, so I’ll discuss this from the perspective of an accountant.
You may look at those timelines and think that is quite burdensome. Well, yes, it probably is. So is sorting out what stuff gets put in which category.
However, those sorts of timelines are now the best practice for document retention. There are many of those requirements that are not specifically required by any law or regulation yet it is extremely wise to retain those documents.
Audit reports are a good illustration. There is no practical need to keep those more than a few years since foundations are interested in just the last one or two years of reports. I think that the ECFA membership rules call for providing the most current report to anyone who requests it. I’ve not ever heard of banks wanting more than 3 years of audited financial data. However, the value of audited or reviewed or compiled financial statements is so high that it would be wise to keep them for an extremely long time.
Minutes on the other hand are something that clearly should be maintained permanently in order to defend the Board of Directors in the event that any of their actions are challenged. Formal approval of their actions reduces personal liability. IRS, courts, or other regulators could demand to see the support for a decision that was documented a long, long time ago.
There is a downside due to not having a policy and following it consistently
One factor that is extremely important when it comes to disposing of documents is having a rational and consistently applied justification for why documents are shredded. Lacking that justification creates a huge legal exposure if the organization is ever challenged for anything.
If it appears to a judge or government regulator that you destroyed something merely because you didn’t want someone else to see it, you could possibly lose the case on those grounds alone. If you can show that your policy calls for destruction of particular documents at a certain time line, you likely won’t receive serious sanctions.
Remember that I’m not an attorney; I am merely describing what I’m reading about in the court system. If you need more explanation look up the phrase “spoliation.”
A document destruction policy that outlines when to dispose of documents provides a justification for why certain documents were destroyed at certain times.
Two alternatives to having a document retention and destruction policy
First – keep everything. A viable alternative. The downside is that takes up a huge amount of space. Even if you have several rooms in your facility that you don’t need and can afford to have filled floor to ceiling with paper now, eventually you’ll need that room.
ANother downside is that if you ever get sued for something, you might have to go through all the boxes in those several storage rooms to make sure you pull out every document that is related to the situation. Here’s just one hypothetical I can think of: If you are sued for employment discrimination, you might have to produce every job application you’ve ever received. Think how many there could be over the last three or four decades. THink how many boxes you would have to sort through to find them all.
Second – shred what you feel like when you feel like it. A dangerous alternative. If you ever get sued for anything and there might have been a piece of paper in the stacks of stuff you destroyed that the other party thinks would have helped its case, you will lose the case. At least that is what I’ve read in several articles.
Like it or not, the argument you hear will be that you destroyed some particular document 3 or 10 years ago because you knew it would prove the allegations that surfaced today. Sometimes judges will agree. See “spoliation” above.
Not that much stuff falls into the permanent category
The good news of those retention timelines are that they will allow for the timely disposal of the vast majority of documents that an organization accumulates. The volume of material that is in the permanent retention category is a small portion of the documents generated by an organization.