This post about record retention originally appeared in the Western Michigan Chapter of ARMA newsletter and was written by our guest blogger, Dawn Garcia Ward of Warner, Norcross and Judd and her colleague Emily Bakeman.
Discarding records too early – particularly during the period a record is required to be kept under applicable laws – can expose an organization to liability. Due to uncertainty regarding how long is long enough, an organization may try to err on the side of caution and keep data indefinitely. However, this approach overlooks the dangers of keeping records too long. The State of Michigan itself has recognized the dangers of this approach, noting that, "if records are kept too long, they can waste valuable storage space, and they can become a liability" if the entity becomes involved in litigation.
1. Costs of Record Retention
The most obvious cost of retaining large amounts of data for long periods of time is the cost of storage itself. Experts estimate that it costs an organization approximately $4 per year to store a single box of paper records and $2 to $20 per year to store each gigabyte of electronic data. While electronic data prices are declining, the rate of data production is increasing at a much greater rate, resulting in an ever-increasing net cost of record storage.
2. Costs of Discovery
Not only does limiting the amount of data stored by an organization reduce day-to-day storage costs, it also reduces the cost of locating records, particularly in the event of litigation. As discussed below, a discovery request may require a company to locate any records in their possession or their employees' possession that addresses a given issue. Searching old and voluminous records to identify documents to be produced can be extremely expensive and time consuming. The average cost incurred by a company in connection with the discovery of electronic data ranges from $1 million to $3 million per terabyte of data. A reduction in the amount of stored data can significantly decrease these costs.
3. Potential Liability in Litigation
When served with a discovery request in connection with litigation, a party must produce all documents in its position that are responsive to that request, even documents far longer than legal or business considerations require. An organization that maintains records in this manner has effectively paid storage costs for a trove of potentially-damaging evidence that it will be required to produce to the opposing party.
Additionally, once litigation has commenced, an organization may not destroy any records potentially relevant to the litigation, and will face serious penalties if it does so. Therefore, it is wise for a company to dispose of outdated records on a routine basis under a well-defined policy. Destruction of records in accordance with a written policy eliminates potentially harmful evidence from an organization's files, provides a defense to claims that the organization destroyed the records to conceal evidence and reduces the likelihood that the organization will inadvertently fail to produce relevant documents.