There is a legend surrounding one of the Wall Street financial crimes during the Great Recession. One of the executives denied that he destroyed business records, saying:
“I didn’t tell my secretary to take the documents and rip them to shreds.
No…I told her to take the documents and ship them to the Feds.”
Record Retention Policy. It is prudent for businesses to consider how long they need to keep records and adopt a records retention policy. As noted below, some statutes and regulations require certain records to be maintained for a set period of time. As important, some business records and contracts need to be secured as an asset of the company. Businesses should also consider whether litigation is “reasonably anticipated,” in which case records are retained pursuant to a “litigation hold.”
Litigation Hold. If a company reasonably anticipates litigation, it must implement a “litigation hold.” Some laws also require documents regarding legal investigations to be retained. For instance, Section 802 of the Sarbanes Oxley Act imposes penalties of up to 20 years imprisonment for altering, destroying, concealing, or falsifying records, documents, or tangible objects with the intent to obstruct, impede or influence a legal investigation. This section also imposes penalties of up to 10 years on an accountant or auditor who knowingly fails to maintain audit or review papers for a period of at least 5 years.
Unfavorable inferences due to destruction. A business can face great risk for failing to retain proper regulatory records. It is not unusual for courts and regulators to draw “unfavorable inferences” against a company that fails to appropriately retain records. Judges have also imposed a variety of sanctions in such cases, including disallowance of certain defenses, witness preclusion, reduced burden of proof, removal of jury challenges, and limiting trial rights. In some cases, the courts have even gone so far as to dismiss a case when a party failed to produce evidence.
Electronic Discovery. While electronic records can be deleted, sophisticated forensic methods can often retrieve “lost” data. The discovery of such “lost” data is not well received by courts or regulators. E-discovery violations are the most common form of sanction in the legal system, with the failure to preserve electronically-stored information (ESI) as the most prevalent sanctionable conduct.
Emails. Businesses should consider adopting a formal retention/destruction policy for emails. Public companies must generally keep emails for at least three years, and many regulated industries must keep them even longer.
Specific Regulatory Requirements. Almost all regulated companies must maintain a records retention policy. As noted below, even unregulated companies must retain certain employment records for a minimum period of time. The following are a list of some of the retention requirements for certain industries and professions:
REGULATORY RECORDS
The government often requires that licensees or persons or businesses in regulated professions or industries keep certain records for set periods of time. If you are in such a profession or industry, you should carefully review all applicable regulatory requirements. Examples of laws that require records to be maintained include, but are not limited to, the following:
Hospital Records
Seven years (Minn. Stat §145.32)
Insurance Agents
Six years (Minn. Rule 2795.1400 & 2795.0300)
Insurance Company Market Conduct Records
Three years
Patient Records of Licensees of Department of Human Services
Seven years
Center for Medicaid/Medicare Services
Seven years. (42 CFR 424.516 (f)(1)(2) and 42 CFR 424.515 (f)(1))
Real Estate Agent Records
Six years
Physician Records on Patients
Seven years
Behavioral Health Providers
Seven years (Minn. Rule 2150.7535)
IRS Required Tax Return & Support Retention
Three years, but see business recommendations below.
Sarbanes Oxley Audit Records
Seven years
PERSONNEL RECORDS
Personnel records are another category where state or federal laws require records to be kept for a certain period of time. Examples include, but are not limited to:
ERISA Records, including summary annual reports, summary of material modifications, correspondence with TPA, brokers, service providers, investment policies, Committee minutes, collective bargaining agreements, claim records, legal opinions, journals, checks, payrolls, Form 5500s, insurance policies, employee enrollment and election forms, beneficiary designation forms, employee rosters, documentation of bonding, fiduciary insurance, flexible spending accounts documentation, summary plan description, trust agreements, plan documents
Six years following the end of the tax year.
COBRA Records, including general notice, election notice, notice of termination, COBRA policy, COBRA correspondence with employees including the returned election forms and premium payments
7 years following the end of the tax year
Federal Withholding and Social Security Taxes, including amounts and dates of all wage, annuity, and pension payments, employee names, addresses, social security numbers, employee occupations, copies of W-2 forms, dates of employment, copies of employees income tax withholding certificates, dates and amount of tax deposits, copies of filed returns, tax records, documentation concerning tips, in-kind wages, fringe benefits
4 years following the end of the tax year.
Unemployment Benefits. Documentation for each pay period of number of employees, employee names, social security numbers, wages paid, dates of hire and layoff
5 years
Employment Identification via Form I-9
3 years after the date of hire.
OSHA Records, including all recordable occupational injuries and illnesses
5 years
OSHA Employee Records on toxic substances and harmful physical agents
30 years
OSHA Employee Medical Records
10 years
Family and Medical Leave Act documentation concerning payroll records, occupations, daily, weekly, and total wages for each pay period, overtime calculations
Fair Labor Standards Act documentation for deductions, billing records, wage rate schedules, work time schedules
2 years
Title VII, ADA and Age Discrimination in Employment Act documentation, including personnel records which an employer makes and which are related to (i) job applications and inquiries; (ii) promotions, demotions, transfers, selections for training, layoffs, recalls, discharges; (iii) job orders submitted to employment agencies or unions for the recruitment of employees; (iv) test papers; (v) results of physical exams; (vi) any advertisements or notices of job opportunities
1 year
Age Discrimination in Employment Act documentation relating to payroll records containing each employee’s name, address, date of birth, occupation, rate of pay, and compensation earned each week
3 years
GENERAL BUSINESS RECORDS
In some cases, it is simply good practice for business to hold onto important records, such as tax audits, key business records and the like. Illustrative, non-exclusive examples include:
Business records such as accounts payable ledgers, accounts receivable ledgers, bank statements, expired contracts, invoices, sales records, subsidiary ledgers, travel records, vouchers
Should be kept six years
Tax returns, bills of sale, mortgages, retirement and pension records, corporate documents, annual financial statements, IRS correspondence, depreciation schedules, journals, deeds, property records
Should be kept indefinitely
Internal audit reports, physical inventory, general correspondence, personnel records (but see specific laws above), expired insurance policies, time cards
Three years
The materials in this article are for informational purposes and do not constitute legal advice. If you have questions about how long you or your business should keep particular types of records, you should discuss them with your attorney. Failing to keep records for the required period of time can sometimes lead courts and government agencies to assume unfairly that you got rid of the records because you have something to hide.
***
Swanson Hatch, P.A. is a law firm founded by two former Minnesota Attorneys General: Mike Hatch and Lori Swanson, who consecutively served as Attorney General of the State of Minnesota for 20 years, from 1999 to 2019. Lori Swanson served as Attorney General from 2007 to 2019. Prior to that, she served as Solicitor General of the State of Minnesota and Deputy Attorney General. She was previously Chair of the Federal Reserve Board’s Consumer Advisory Council in Washington, D.C. She can be reached at lswanson@swansonhatch.com, or at 612-315-3037. Mike Hatch served as Attorney General from 1999 to 2007. Prior to that, he served as Commissioner of the Minnesota Department of Commerce for seven years. He can be reached at mhatch@swansonhatch.com, or at 612-315-3037.
www.swansonhatch.com
431 South Seventh Street, Suite 2545
Minneapolis, MN 55415 612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
There is a legend surrounding one of the Wall Street financial crimes during the Great Recession. One of the executives denied that he destroyed business records, saying:
Record Retention Policy. It is prudent for businesses to consider how long they need to keep records and adopt a records retention policy. As noted below, some statutes and regulations require certain records to be maintained for a set period of time. As important, some business records and contracts need to be secured as an asset of the company. Businesses should also consider whether litigation is “reasonably anticipated,” in which case records are retained pursuant to a “litigation hold.”
Litigation Hold. If a company reasonably anticipates litigation, it must implement a “litigation hold.” Some laws also require documents regarding legal investigations to be retained. For instance, Section 802 of the Sarbanes Oxley Act imposes penalties of up to 20 years imprisonment for altering, destroying, concealing, or falsifying records, documents, or tangible objects with the intent to obstruct, impede or influence a legal investigation. This section also imposes penalties of up to 10 years on an accountant or auditor who knowingly fails to maintain audit or review papers for a period of at least 5 years.
Unfavorable inferences due to destruction. A business can face great risk for failing to retain proper regulatory records. It is not unusual for courts and regulators to draw “unfavorable inferences” against a company that fails to appropriately retain records. Judges have also imposed a variety of sanctions in such cases, including disallowance of certain defenses, witness preclusion, reduced burden of proof, removal of jury challenges, and limiting trial rights. In some cases, the courts have even gone so far as to dismiss a case when a party failed to produce evidence.
Electronic Discovery. While electronic records can be deleted, sophisticated forensic methods can often retrieve “lost” data. The discovery of such “lost” data is not well received by courts or regulators. E-discovery violations are the most common form of sanction in the legal system, with the failure to preserve electronically-stored information (ESI) as the most prevalent sanctionable conduct.
Emails. Businesses should consider adopting a formal retention/destruction policy for emails. Public companies must generally keep emails for at least three years, and many regulated industries must keep them even longer.
Specific Regulatory Requirements. Almost all regulated companies must maintain a records retention policy. As noted below, even unregulated companies must retain certain employment records for a minimum period of time. The following are a list of some of the retention requirements for certain industries and professions:
The government often requires that licensees or persons or businesses in regulated professions or industries keep certain records for set periods of time. If you are in such a profession or industry, you should carefully review all applicable regulatory requirements. Examples of laws that require records to be maintained include, but are not limited to, the following:
Personnel records are another category where state or federal laws require records to be kept for a certain period of time. Examples include, but are not limited to:
In some cases, it is simply good practice for business to hold onto important records, such as tax audits, key business records and the like. Illustrative, non-exclusive examples include:
The materials in this article are for informational purposes and do not constitute legal advice. If you have questions about how long you or your business should keep particular types of records, you should discuss them with your attorney. Failing to keep records for the required period of time can sometimes lead courts and government agencies to assume unfairly that you got rid of the records because you have something to hide.
Swanson Hatch, P.A. is a law firm founded by two former Minnesota Attorneys General: Mike Hatch and Lori Swanson, who consecutively served as Attorney General of the State of Minnesota for 20 years, from 1999 to 2019. Lori Swanson served as Attorney General from 2007 to 2019. Prior to that, she served as Solicitor General of the State of Minnesota and Deputy Attorney General. She was previously Chair of the Federal Reserve Board’s Consumer Advisory Council in Washington, D.C. She can be reached at lswanson@swansonhatch.com, or at 612-315-3037. Mike Hatch served as Attorney General from 1999 to 2007. Prior to that, he served as Commissioner of the Minnesota Department of Commerce for seven years. He can be reached at mhatch@swansonhatch.com, or at 612-315-3037.
www.swansonhatch.com
431 South Seventh Street, Suite 2545
Minneapolis, MN 55415
612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.