Legal tips for office spring-cleaning

Ah, it’s that time of year again. The birds are once again chirping gaily and seemingly daily rain showers wash away the detritus of winter.

It’s spring! With it comes the urge to do a little spring-cleaning, which includes that cluttered desk and overflowing filing cabinet of yours. However, before you start throwing everything out, there are a few considerations to keep in mind. Namely, could filing that paperwork in the trash land you in some legal hot water later?

Some industries, like the financial and insurance sectors, have strict guidelines spelled out by law for how long specific documents and records must be maintained. Others just follow a general rule of thumb for everything not maintained by HR. Before you fire up the shredder it’s important to understand where your company and industry fall in that spectrum.

Recordkeeping requirements vary widely by industry, record type, and purpose, notes Jessica M. Kramer, a partner at Kramer, Elkins & Watt LLC (KEW) in Madison who also blogs about employment law for IB.

“For example, as a law firm we keep client files for 10 years, because the Office of Lawyer Regulation could investigate a matter for up to 10 years after the work was performed. However, as an employer, we keep employee pay-related records for three years, as required by Wisconsin law.”

Kramer offers the following list that includes documents and information that all employers should retain, with respect to their employees:

  • Full name and social security number;
  • Address, including zip code;
  • Birth date, if younger than 19;
  • Sex and occupation;
  • Time and day of week employee’s workweek begins;
  • Hours worked each day;
  • Basis on which employee’s wages are paid (e.g., per hour, per week, piecework);
  • Regular hourly pay rate;
  • Total daily or weekly straight-time earnings;
  • Total overtime earnings for the workweek;
  • All additions to or deductions from the employee’s wages;
  • Total wages paid each pay period;
  • Date of payment and the pay period covered by the payment;
  • Worker’s compensation records, including employer’s first report of injury;
  • Tax forms filled out by individual employees.

According to KEW’s website, not every requirement listed above is applicable in every situation. Depending on each employer’s individual type of business, business size and business structure, and the type of employees employed, an employer may be subject to additional or different requirements.

One type of record that every business with any employees must maintain is a Form I-9, the Employment Eligibility Verification form, which must be kept for one year after employment ends — or three years from date of hire, if employed for less than two years, Kramer explains.

“The financial industry, in particular, has a whole set of regulations regarding recordkeeping; going into those would be beyond the scope of this article,” says Kramer. “Any business that is required to be licensed or certified, including many financial services businesses, should consult the agency that issues that license or certification for guidance on recordkeeping requirements. Many agencies will have such requirements posted on their website.”

According to Kramer, as the world has become more paperless, and consumers and professionals more tech savvy, a significant number of industries and regulatory bodies are moving away from “hard copy” requirements. However, those requirements are not necessarily completely gone.

“It can take regulatory bodies years — and years — to catch up with the real world,” Kramer notes. “For example, in the legal world, facsimile is still considered an official form of transmission to courts and other attorneys, whereas email is not.”



Pick six

When there are not specific regulations requiring otherwise, a good rule of thumb for maintaining records is six years, recommends Kramer. This is because the statute of limitations on suing for breach of contract is six years in Wisconsin.

“Let’s say, for example, that a landscaping company does some work for a client,” Kramer says. “A couple of years later the company is purging old records and sees no reason to keep records relating to the transaction with this particular client, since the job was completed and the client paid, years ago. However, that client could still come back and initiate a lawsuit against the landscaping company for breach of contract within six years from the completion of the work or the last payment.

“If that were to happen — and you never know what might make a person come out of the woodwork to make a claim years later — the landscape company would be in a better position to defend that lawsuit if it had all of the records related to the work performed for that client, including payments made, correspondence exchanged, and anything else about this client.”

Penalties relating to records also vary as widely as the different recordkeeping requirements themselves, Kramer notes.

“There are the legal penalties that are proscribed by law,” she explains. “One example, for improper disposal of protected health information covered by the Health Insurance Portability and Accountability Act (HIPAA): fines ranging from $1,000 to $50,000 for each violation, up to a total of $1.5 million in a calendar year. For failure to maintain Form I-9 for employees as required by federal law: $216 to $2,156 for each form.

“There are also penalties that are of a more practical nature, but can end up being very severe,” continues Kramer. “Failure to have the documents you may need to defend a claim, or even pursue a claim, years down the road can make a huge difference in success in any given dispute.”

Getting shredded

It shouldn’t come a shock that when disposing of old records that are no longer needed, shredding is best. A number of companies in the area specialize in shredding and proper disposal of sensitive information, and the use of such services is an affordable alternative to shredding documents in-house, Kramer notes. She advises companies and business owners to be sure that the shredding/disposal company can provide you with a certification that they maintained confidentiality throughout the destruction/disposal of your documents.

Kramer also says while the types of documents or information that must be kept confidential and disposed of in a manner that protects such confidentiality may vary by industry, thinking about the following questions can help a business determine whether to shred or simply recycle — Does this document contain information:

  • that I would not have in my possession regarding a client/customer had the client/customer not hired my company?
  • about my company or vendors I use that I wouldn’t want competitors to know about?
  • that is subject to an agreement I signed with another person or entity outside my company?
  • that is inherently sensitive in nature, regardless of who is the subject of the record (e.g., financial information, medical information)?
  • that reveals my strategies or theories about how to grow my business, serve my clients, etc.?

Security is also a concern when transferring hard copy documents to an electronic records system.

Kramer recommends working with an IT company to ensure that any scanning over a network or similar means of converting from hard copy to electronic will keep the information as secure as possible from interference by outsiders.

“Once documents are converted to electronic form and will be stored only electronically, two additional steps should be taken: 1) the electronic files should be backed up to eliminate the risk of total loss — again, a competent IT service provider can help with this — and 2) the hard copies should be shredded and disposed of in a secure manner (as outlined above).

With the preponderance of data breaches in the news there might still be some straggling companies unwilling to commit to what they see as the security risks of electronic records. To them Kramer responds that even medical records, which contain some of the most confidential information out there, are now being widely maintained electronically.

The new guy or gal

One last item of note, according to Kramer. If you’re a new hire taking over the desk or office space of a long-time employee, you may be confronted with files dating back many years relating to ongoing clients or other facets of the job. What should you keep to help you in your transition and what can you safely dispose of?

First, a company should have a records retention policy, Kramer notes. The policy should specify what types of records to keep, and in what format, for how long.

The employee can begin by sorting documents by type. “Using my earlier example of my law firm, anything client-related should be separated from anything employee-related — law firms, of course, should be keeping these things separate already,” explains Kramer. “Then, the employee should write down the cut-off date: if it’s newer than ABC date, keep it. If it’s older, toss it (or shred it).

“Often, especially when there is higher turnover within a company, records are kept for what seems like forever due to lack of knowledge about why a record was kept in the first place, or out of fear,” adds Kramer. “If a company learns of its recordkeeping requirements, and is willing to put in the staff time to dig into those old records, it can probably find that many documents can go. Decluttering feels good, whether it be at home or at work.”

Click here to sign up for the free IB ezine – your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.