If there’s one thing that lawyers know well, it’s paperwork. Litigation sets precedents for the regulatory requirements of every facet of a business, from employee relations to corporate licensing to facilities management, and piles and piles of documents are required to prove compliance. Having all these documents neatly filed and easily accessible will go a long way toward making sure you don’t end up in a courtroom that delivers verdicts which lead to more laws and more paperwork.
Of course, second only to the comfort of knowing you’re legally sound is the joy of sending all that years-old coffee-stained paperwork back to the fiery depths whence it came. But when is it OK to relish in that catharsis? State, federal and local laws governing that timeline are ever-changing. Do you really need to minor in law just to figure it out? When is it OK to overturn the drawers and fire up the industrial-strength shredder?
That topic was on the mind of Dr. Neil Park, director of clinical affairs at Glidewell Laboratories, when he and I sat down recently to discuss legal concerns of the small-business owner. I thought it might be beneficial to provide an excerpt of that conversation. Though you may think there’s never existed a policy in history that a lawyer didn’t salivate at the prospect of enacting (Does it require more paperwork? Yes? Pick it up!), you may be pleasantly surprised by my unorthodox conclusion.
Dr. Neil Park: We were talking earlier and found we both admire the solo practitioner who takes on the risk and responsibility of running a small business. In fact, we both used to be solo practitioners. We each had a small private practice in our respective disciplines where, at one time or another, we were the CEO, the vice president of human resources, the CPA, the director of IT, the head of the payroll department, an advertising and marketing executive, and, of course, the janitor.
That’s a lot of hats and a lot to worry about; and now you want dentists to also worry about having a record-retention policy?
Gary the Lawyer: Absolutely, you have to worry about your record-retention practices. Of all the legal articles I’ve ever read on the subject and all the advice I’ve ever gotten from lawyers who specialize in such things, I’ve always heard that businesses must have a record-retention policy. I’m actually fresh off reading several articles that start by saying it’s the duty of every good lawyer to recommend a document-retention policy for their corporate clients.
NP: So how do you go about creating a record-retention policy?
GTL: A record-retention policy is really more of a record-destruction policy that defines the lifespan of all documents and determines at what time the destruction of a document can occur. There are records that as a matter of law must be maintained for a certain number of years to meet compliance requirements; and then there are records that you will just want to maintain for business purposes. The policy will distinguish those things, and tell you when you can destroy those records and how those records should be destroyed.
NP: Can you give some examples?
GTL: Sure. Employment records are a good example of records with specific state and federally mandated retention times. According to federal law, all personnel and employment records made or used must be preserved for one year from the date of making the record or the personnel action involved, whichever occurs later. This includes, but is not limited to, records dealing with hiring, promotion, demotion, transfer, lay-off, termination, rate of pay, compensation, tenure, selection for training or apprenticeship, or other terms of employment, as well as requests for reasonable accommodation, and even application forms submitted by applicants. So, for instance, in the case of involuntary termination of an employee, the company must retain the terminated employee’s personnel or employment records for one year from the date of termination. That’s the federal mandate. State laws can be different.
Not every record, though, is legally stipulated to be maintained for a certain time. In fact, most documents you are going to encounter — contracts, purchase orders, emails, voice recordings, and the like — will be left up to your own prudence as to how long you want to maintain them. For instance, there is no retention law that I’m aware of that requires you to keep copies of your insurance policies for a certain number of years. However, you will obviously want to maintain those at least until the statute of limitations runs out on any claims that might be brought under those policies. If you stop treating a patient, for how long do you keep the records? Knowing the statute of limitations for a claim in your state will go a long way toward answering that question. Another factor that will inform your decision is whether the person is a minor, because you would have to keep that record until the age of majority plus the statute of limitations. Are there any other laws that apply? These should all be clearly documented in the written retention policy for easy access.
NP: And once the retention date lapses, you mark the document for destruction?
GTL: Exactly. And you should define exactly how to delete or destroy documents, and then diligently do so in accordance with your own policy.
NP: So how do you go about creating such a policy?
GTL: You need to get a lawyer to assist you. There’s no definitive form that works for everybody, and there are over 14,000 state and federal laws regulating document retention. And not just for medical records, but for every area of your business that you can think of. Employment records, tax records, various other records; they all may have state and federal guidelines regarding retention. Keeping abreast of all those retention requirements and making sure you’re not destroying records that need to be maintained — that can’t be done in a one-size-fits-all form. It needs to be customized to your business by a lawyer. I created a document-retention policy that was 48 pages long and contained over 500 categories of documents with the retention and destruction dates.
NP: Sounds like creating such a policy is expensive and involves a lot of work.
GTL: It’s going to be expensive. You need to get an outside expert involved, likely a lawyer. And then you need to make sure you maintain the policy over time with updated statutes. And, most importantly, you need to make sure you are complying with your own policy. The worst thing you can do is to create a policy and then not comply with it. You should consider hiring a document-retention specialist.
NP: Are there penalties for destroying documents too early?
GTL: The penalties for destroying documents too early can be huge. Especially if there has been some type of a claim made against your business, and then you destroy documents. A judge is definitely going to sanction you if you destroy documents involved in the claim, or if you have destroyed documents out of sequence with your written policy. You need to make sure you put a “litigation hold” on documents that may relate to a legal claim.
NP: So you have to set up a schedule for the destruction of each type of document and then follow through with the schedule. What’s the purpose of destroying documents at all?
GTL: One of the primary stated purposes, from a legal standpoint anyway, is so you don’t maintain documents that could contain evidence harmful to you. If, for example, there is some evidence in your files that could be misconstrued as malpractice, you have destroyed that. Another stated purpose is for security reasons; that is, you’re going to have to maintain physical security for each document you keep. That can be expensive, though potentially less so than if someone breaches that security.
NP: Are these really good enough reasons to go through the expense and hassle of a document-retention policy? Can’t you get away without one?
GTL: I think that’s the million-dollar question right there, and it’s going to come down to cost analysis. Right now, the price of secure storage is continuously coming down, and you can almost never go wrong by retaining too many documents for too long. So let me suggest that if you are a small business, assuming that you have the money for secure storage, I honestly think you’ll spend less over time, and save an incredible amount of administrative man-hours, by not having a retention policy. After all, you have to keep documents secure during the retention period anyway. So just continue that by essentially doing nothing other than enlarging your storage database or warehouse.
NP: Wait a minute, you just came full circle on us here. Now you’re saying we don’t need a document-retention policy?
GTL: A document-retention policy is meant to keep your business compliant with legal regulations while also avoiding superfluous storage expenses. I’m saying in my 25 years of doing this, I’ve never been hurt or seen a client get hurt by a document that was retained beyond the date when it could legally be destroyed. In other words, what somebody alleges you did is almost always worse than the truth that the pertinent documents show. So as long as you can maintain the documents safely and securely, then it’s my opinion — and understand I think it is a radical opinion — that you can save yourself expense and time (not to mention sanity) by not bothering with a document-retention policy at all. Just keep everything.
Look, it’s incredibly complex — maybe even impossible — to try to figure out how long every document needs to be retained by state law, or federal law, or business necessity. (Who can predict business necessity?) Or how about trying to predict which documents need to be maintained past the statute of limitations because they carry weight with some course of action that you don’t even know exists? Simplify your life: Just don’t intentionally delete anything. Scan it, image it, keep it secure, keep it locked up, and never get hit with penalties for failure to maintain documents; never get stuck with someone else’s version of the truth; never pay lawyers and document destruction services to destroy documents. Just be sure to protect those documents. You’ll protect yourself and you’ll save money.
NP: Thanks. That does sound a lot simpler.
GTL: Glad to help.