Skip to Content
Menu Toggle
Effective Document Retention in the Construction Industry
subscribe to legal alerts

subscribe to our blogs

sign up now

Media Contacts

Charles B. Jimerson
Managing Partner

Jimerson Birr welcomes inquiries from the media and do our best to respond to deadlines. If you are interested in speaking to a Jimerson Birr lawyer or want general information about the firm, our practice areas, lawyers, publications, or events, please contact us via email or telephone for assistance at (904) 389-0050.

Effective Document Retention in the Construction Industry

August 11, 2016 Construction Industry Legal Blog

Reading Time: 18 minutes

Often leaders in organizations view a document retention policy as simply a written document that a company creates or obtains and then saves on its server with every other document the company has created or obtained and now retains. Best practices dictate that an effective document retention policy be seen as a living, breathing policy memorialized in writing that is to be thoughtfully created, managed, communicated to and understood by everyone at every level in the organization—starting at the top.

The consequences of generating and maintaining a corporate document retention policy (as well as actually retaining the corporate records) are significant. As the construction and legal industries evolve with technology, the need to have sound document retention policies becomes more than a luxury—it is a mandate. Sound document retention policies require proper research, careful planning and steadfast commitment to implementation. This blog post discusses why your company should create and maintain a document retention policy, what is involved in creating a sound document retention policy in the construction industry, and legal and practical considerations for what the parameters of your company’s document retention policy should be.

Why create and maintain a document retention policy?

A document retention policy can be seen as an insurance policy, but it is also a sound business management policy. Like with insurance, there is an upfront investment made in order to avoid catastrophic legal expense in the future. Within litigation, the search and review of e-mails and other Electronically Stored Information (ESI) can be so costly that companies are put out of business. It does not take a large company with extensive financial resources to create enormous volumes of ESI. Multi-million dollar eDiscovery bills have incentivized larger corporations to take stock and to create document retention policies. Smaller companies have had to close their doors because of litigation expenses that could have been avoided if a sound document retention policy had been in place. Poor or non-existent document management can bankrupt a company if and when litigation hits. If a construction industry company does business long enough, it is inevitable that it will be involved in a lawsuit. Implementing an effective document retention policy involves a choice by management to proactively manage risks instead of waiting to react to litigation.

Failing to produce documents in a lawsuit can also result in court sanction in the form of an award of attorneys’ fees in connection with attempts to obtain records that could not be produced. Even worse, if your company is sued and can’t produce the documents you should be able to produce, your company may be subject to an instruction to the jury that you have manipulated the evidence and that the evidentiary issue sought to have been proven by the opposing party should be considered as proven. This is an extraordinary consequence in that a jury is permitted to speculate that the worst possible information was contained in the missing document, when in reality the document may have been benign or helpful to your case.

The good news is that there is a bigger benefit to effective document management than just risk management. Having an effective policy in place is also best business practice. It creates a well-organized system for your organization’s information, organized and stored in a way that you are able to locate and utilize it when needed.

What is involved in creating a sound document retention policy in the construction industry?

Assembling the Team

To institute document retention best practices, the first step is to get top management on board to bless creation of the policy and later manage the policy, including incentivizing compliance with and the enforcement of the policy. Next, have legal, IT, and records management professionals—either in-house or outside, depending upon the company’s size and resources—perform their core competencies. Finally, train and incentivize all employees to weave document management into their everyday work flow.

Investing in, Creating, Memorializing, and Making a Plan to Manage the Policy

If an organization is going to invest resources in a document retention policy, then the policy should be effective and work for the company. Management often thinks of a document retention policy as a written document that they should obtain and then follow. They imagine the policy document comes first. Actually, for an effective document retention policy, it is best to think in reverse. First, ask, “What do our employees need to be doing on legal, practical, and business levels regarding records management and retention?” Second, take the answer to that question, use it to create protocols and procedures that fit the organization, and then memorialize that in writing. Finally, manage, audit, and review the policy at predetermined intervals based on what makes sense for the business (annually, bi-annually, or quarterly). At each stage along the way, seek feedback about the policy from employees and team members.

Top Management’s Responsibility – A Case Study

An effective document retention policy is understood and enforced by top management. As outside counsel, in past engagements, through a five minute conversation we’ve been able to ascertain the relative effectiveness of the proposed or previously implemented policy. Put simply, does management know the why, what and how in the operation of the document retention policy?

Here is one example of an executive’s ideal level of understanding of her company’s document retention. At a face-to-face meeting with the executive, she is able to explain why the company instituted their current policy and how it was implemented. There may have been litigation with a high-cost document review that led the company to make the choice to be proactive for the future. She recalls the details of the current policy, including the IT aspects of the policy, or at a minimum, has qualified subordinates who can explain all salient details. For example, the senior executive and her team should be able to tell us how often emails are deleted in the normal course of business based on their location in an employee’s email account (Inbox vs. Folder). Senior executive should also know how the company’s client management system is utilized to save the essential records, including removing essential emails from auto delete. She should be able to state how the organization ensures auto delete is halted if litigation is anticipated. Finally, she has methods with which she communicates the policy to her employees and motivates them to follow it, e.g. conducting a quarterly team meeting to discuss the policy in addition to ensuring all employees have access to the written policy. After a client meeting like this one, we know the policy is in place and are pretty confident that the policy is being implemented. The actual policy may need adjustment to stay current with the law and best practices, but the policy is working for the company. It is effective.

Other Considerations

A document retention policy is part of a broader records management policy. There are other considerations and policies that overlap with document retention and records management. Two such policies are a litigation hold policy and a social media policy, each of which could encompass their own article, but deserve mention here.

In order to institute best practices of records management, each of these policies should be incorporated into an overarching records management policy at an organization. Litigation holds, also called legal holds, encompass the continuum starting with what to do regarding preservation of records once litigation is anticipated, continuing through the duration of the litigation and finishing with the termination of litigation when the litigation hold may be released.

Social media policies can protect an organization by preventing unfavorable social media posts made by employees. Social media posts are considered relevant and therefore discoverable in litigation, even with privacy settings in place, and it is important to educate management and employees regarding this. Legal counsel should assist in crafting a policy that fits your organization in a similar method to that discussed above for document retention, taking into account legal, practical, and business considerations.

Translating Effective Document Retention to the Construction Industry

To craft any good document retention policy, including those dealing with the construction industry, it is always best to take the general and then add the specific. The general aspects that should be woven into a document retention policy include the roles of top management, legal, records management, and IT as discussed above. To drill this down to the specifics of the construction industry, consider who the players are, the types of documents they are creating, and where they are stored.

Who Is Creating the Record? What Are They Creating? Where Are They Storing It?

Many organizations have employees at a desk with their assigned computers in front of them. While they do utilize mobile devices, a topic for another day, they are often less mobile than construction industry professionals. Also, the construction industry is unique in utilizing both employees vs. independent contractors. When creating a document retention policy, imagine who are the players, where are they, what are they doing in the way of creating records, and what type of records are they creating (emails, photographs, plans, specifications, contract drafts, show drawings, etc.).

Consider who is on a project: field engineers, project managers, clerk-of-the-works, and job superintendents. Take into account what records they are creating: diaries, logs, photographs and daily reports. Determine where they are storing the records: iPads, mobile phones, their personal email account, the company’s server, and/or the cloud. Decide how best to manage retention and disposal of those records based on time (age), location, whether duplicates exist, and various other legal and business considerations.

Consider who is corresponding and exchanging information within the organization and in relation to projects: contractor with owner, architect with contractor, construction manager with contractor, contractor with subcontractors and suppliers. Take into account what form the correspondence is taking: memoranda, hand-written notes, e-mails, text messages. Again, determine where they are storing the correspondence: in mobile devices (personal and company owned) and elsewhere. Decide how best to manage retention and disposal of those records.

Construction is a document intensive industry. Consider what other records are created per project, their value, and where they are or should be stored. Records include: contracts, addenda, change orders, purchase orders, invoices, RFIs, progress reports, change directives, liens, 3-D modeling, CPM diagrams, and more. Take this knowledge of the processes and protocols of the everyday workings of your business, and couple that with best document retention practices to create a living, breathing policy that works for your particular organization. Once you understand the volume and scope of date your company utilizes, who is responsible for maintaining it, and how you are going to maintain it, you then have to determine exactly how long it should be maintained for.

How Long Should Records Be Retained?

Realistically, any construction company should begin their retention analysis with the understanding that all of its records must be kept and that the only issue is the duration of that retention. That being said, records should not all be looped into the same category, for they are not all treated equally in the eyes of the law. Duration of retention is a question for the document retention team (senior executives, legal, IT, and records management) that you have assembled, and it depends on variables in place within and around your company.

Some variables to consider include:

  • Categories of records and whether there are statutes or regulations that impact how long a certain type of record must be maintained;
  • Risk tolerance/ risk aversion of management;
  • A cost-benefit analysis of retention vs. destruction;
  • Availability of the records to other parties on shared project servers;
  • Likelihood of disputes arising relating to certain types of records or certain types of projects.

There are certain records, like tax returns, where regulations impact how long the records must be retained, but in most instances there is no hard-line rule on duration of retention. Instead there is a minimum/ maximum time range that should be considered by the team in order to make an informed decision on the duration of records retention to employ in your company’s policy. Not to sound too much like a lawyer, but generally, the period of retention for a given document must be reasonable in light of the facts and circumstances surrounding that record.

In conducting the analysis to determine how long records should be retained, your team may first want to look to the maximum retention time frame, and decide (i) which categories of records to consider keeping for this long, e.g. contracts, and (ii) the pros and cons of keeping records for this length of time vs. defensibly deleting certain records, e.g. e-mail. The maximum duration view of construction industry document retention is to keep all records until the statute of limitations or statute of repose runs for actions based on contracts, patent defects, or latent defects. These periods may, but likely will not, exceed ten years after a project is substantially complete. Maintaining records this long can be costly and create an undue administrative headache.

Therefore, the next step is to start from the maximum duration and see if you can defensibly reduce the length of time you will retain documents. In determining a defensible reduced retention duration, you should perform (i) a cost-benefit analysis, (ii) a risk analysis, and (iii) a legal and factual analysis germane to your company’s particular legal obligations and business needs, in order to decide whether keeping records for the maximum retention time frame is truly necessary.

As you begin to weigh factors that impact different categories of documents, you may find that shorter retention periods may work for some documents, but not others. For example, to the extent that electronic documentation is already available through shared project servers with other key players in the project, corporate record retention policies can be more aggressive in deleting and destroying old, duplicative records, and a shorter retention period can be incorporated into your policy for records readily available to other parties.

There is some danger in drafting document retention policies that are too short, as courts may find that the policy was created in bad faith as a means of limiting liability or damage exposure. It may be presumptively unreasonable to have a document retention policy which calls for the swift eradication of categories of documents which have historically proven to be requested or utilized in lawsuits. Purposefully destroying key documents as a matter of “policy” can backfire on your company and cause far more harm than the policy prevents. On the other hand, courts understand that with enormous amounts of ESI, it is necessary for companies to get a handle on all the data. If you find yourself in court facing a spoliation sanction, but your company has a well-thought out document retention policy in place with a history of implementing it consistently across the board, and you did not deviate from it in the matter before the court, there is a strong argument for the court to find the destruction was defensible. In sum, your team needs to weigh whether there are reasonable and compelling reasons to destroy documents in an aggressive or abbreviated time frame, because if you draft your policies to call for expedited destruction, and you end up in litigation, you will most likely have to explain your policy to the court, and you will want to have a good grasp of why you had a short retention time in place.

As referenced above, when projects go awry and it is demonstrably clear (either through formal notice or learned inference) that litigation may ensue, it will be presumptively unreasonable to destroy any documents your company retains that are relevant to the anticipated lawsuit—even if destruction is in accordance with corporate document retention policies. Therefore, you should incorporate into your policy that documents destruction will be halted when litigation is reasonably anticipated. If a document covered by a litigation hold is not retained, then the company could be subject to an adverse inference jury instruction, attorneys’ fees, exclusion of evidence, or some other harsh judicial sanction, even to the point of terminating sanctions (dismissal or default judgment) in extreme cases. The punishment is not worth committing the crime in most cases.

In the seminal case concerning e-discovery, the learned Judge Scheindlin emphasized that a corporation’s duty to preserve relevant documents and other evidence attaches once litigation is contemplated and some of the mechanics for complying with this obligation, stating:

The scope of a party’s preservation obligation can be described as follows: Once a party reasonably anticipates litigation, it must suspend its routine document retention/ destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy. On the other hand, if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold. However, it does make sense to create one exception to this general rule. If a company can identify where particular employee documents are stored on backup tapes, then the tapes storing the documents of ‘key players’ to the existing or threatened litigation should be preserved if the information contained on those tapes is not otherwise available. This exception applies to all backup tapes.

Thus, your construction industry document retention policy should address mechanics employed in implementing and monitoring litigation holds and emphasize training on how to treat the special circumstances of pending litigation.

Parting Thoughts

Whether it is the top level executive, the chief technology officer or the versatile I-T “head honcho,” whoever is in charge of the records retention program should know the policy like the back of their hand. That person should be able to explain it, defend it, and troubleshoot it as if it was their own. This person should have significant industry expertise in knowing what should be retained and how. Many large companies tackle this issue by setting up a records retention committee that meets regularly. The committees often include legal counsel, senior management, the head of the IT department and the records retention manager. These committees are run as if they were a board meeting, with minutes kept and activities well documented.

Good document retention policies are disseminated to and accessible by all employees. Employees are trained on the policies, even tested. Employee buy in should be achieved and buy in is best achieved by ensuring the employees understand the who, what, when, how and why of document retention.

Due to the significant impact of anticipated or pending litigation, all companies should have a litigation team wherein specific document archival, retrieval and chain of custody responsibilities are delegated. In small companies, a designated records custodian should be established to field all subpoena requests. Consistency in systems and processes will enable companies to avoid potential legal sanctions for inadvertent non-compliance or other discovery related transgressions. The litigation team should regularly work with counsel to ensure the policy is appropriate and the responsibilities of the team members are discharged in a manner that the law will subsequently require. Having pre-designated vendors ready to address preservation issues is a uniquely proactive step that has saved our clients’ money in the past as well.

In implementing policies, it is important to employ a common sense approach. Document retention policies and procedures should always be tailored to fit the scope and nature of the construction company’s business, the type of project or corporate records kept, the significance of those records in the corporation’s structure and operations, and ongoing business functions and interactions with third parties, including other businesses, employees, customers and partners (both upstream and downstream), and various government agencies.

Utilizing legal counsel in the document retention policy drafting and implementation process is vital to ensure legal compliance, loss mitigation and industry protocols are commensurate with what is required of your construction company. Experienced counsel can assist in: a) identifying key personnel to serve as records custodians and managers; b) drafting records management policy and procedures; c) reviewing the company’s records to formulate the records destruction schedule; d) determining which corporate records can now be destroyed in accordance with the new policy; e) developing a training program for the company’s employees and then training the employees; f) streamlining the company’s archival and filing system to maximize efficiency; and g) recommending software solutions that can be implemented to assist the company in its records management efforts.

In conclusion, records management is about knowing what you have, where you have it and how long you have to keep it. Sound records management programs avoid adverse consequences that may result from the premature destruction of corporate and construction project documents. Lots of folks confuse bad management with destiny. Don’t be that company who is taxed a pound of cure when an ounce of prevention could have been employed.

we’re here to help

Contact Us

Jimerson Birr