Building a Smarter Record Retention Policy for Your Firm
Setting Your Record Retention Policy
Frequent communication and systematic record keeping are vital keys to running a successful, claims-free practice. A common saying among those defending A/E firms is ‘Those who have the most documents win.’ Well-documented projects, maintaining originals and copies of agreements, plans, reports, schedules, requests for information, technical calculations, memos, and other correspondence, tend to avoid many of the problems and disputes that plague projects lacking such systematic written communications.
Some of us remember a time when record retention consisted of taking one’s arm and sweeping off everything on a desk into boxes. The contents of the box were supposed to be cataloged so that, in the event the records were needed in the future, a particular box could be removed from the cavernous warehouse containing them. It was not uncommon for a box supposedly containing correspondence about a project problem to contain carpet samples instead. Records must be filed correctly, or a court or arbitration panel might require your firm to pay for the cost of searching your files for that one file buried amongst thousands. That, my friends, can be enormously expensive.
Record retention ‘back in the day’ of hard copy files and documents was relatively straightforward. Add electronic files to the mix, and complexity ratchets up geometrically. It is no surprise that when a project closes out, there are mountains of information recorded on a variety of media, including computer networks, mobile devices, CDs, blueprints, e-mails and attachments, photographs, and reams of paper. The question then becomes what to do with all the reports, studies, plans, drawings, specifications, calculations, reviews, approvals, correspondence, and other documents generated. Is it prudent to keep it all? If not, which types of records would be appropriate to retain to address your risk management requirements? For how long? What is the best way for our firm to maintain these documents?
The first step in answering this question is to look at the contract you signed with your client. Commonly, clients will require by contract that all project records be retained by the designer for a specific period. It behooves you to try to limit what documents must be maintained and for how long.
The issue of what to keep and how long to retain it largely revolves around the potential need for documentation to defend your firm against charges of negligence and professional liability. Unfortunately, a design firm that provides professional services may find itself sued for negligence long after the project is completed. Indeed, a large portion of claims occur after substantial completion of a project. Whatever the timeframe, your firm will likely remain a primary target of any project claim, even if the problem was the result of poor construction or maintenance rather than design errors or omissions.
Should you find yourself named in a project claim, your defense will largely depend on your ability to produce written documentation of what you agreed to do contractually and what actually happened during the project’s design and construction phases. This is especially true if the claim occurs years after project completion, as there may be few other means (such as statements of witnesses) to confirm your side of the story. Employees leave, retire, or sometimes have passed away by the time a claim arises.
State Statutes Are The Key
State laws offer design firms some protection against claims that are made long after a project is completed. These protections are usually embodied in two areas of law: statutes of limitation and statutes of repose.
Statutes of limitation set time periods in which a party can file a lawsuit once a defect or injury has been discovered. While somewhat useful, statutes of limitation offer only limited protection. The discovery of a defect or injury can occur at any time — often long after the project has been completed and occupied. That means that a firm’s exposure to a claim could theoretically run forever. The Society of Professional Engineers, the American Institute of Architects, and the Associated General Contractors of America have lobbied state legislatures to enact additional protection via statutes of repose.
Statutes of repose differ from statutes of limitation in that they set definite time limits under which a cause of action can be brought against a design firm. Under a statute of repose, the time limit starts running at a specific point in the project’s life, generally at the completion of design services or, more typically, the date of substantial completion of construction. Once the time limit elapses, causes of action are barred, no matter when the injury occurred or the defect was discovered.
Statutes of repose timeframes vary from state to state. A few states do not offer a statute of repose, while others may impose different repose periods for various types of claims. See the tables for a state-by-state summary of statutes of repose. Note: State statutes are subject to frequent changes; please consult with your attorney to verify the current statute of repose and statute of limitations applicable to your project.
Record Retention Policies and Discovery
Because of their specific time limits, the statutes of repose in the states in which you operate help dictate the minimum lengths of time you should retain your records. Generally speaking, you should keep records for the length of the prevailing statutes of repose. Some advisors recommend adding a couple of years for a safety margin. Remember, laws often change. This also applies to these statutes.
Keep in mind that approximately nine out of ten claims are brought within five years after project completion, and nearly all claims are filed within 10 years of substantial completion. Therefore, there is little reason to keep records well beyond the length of your state’s statute of repose unless your client requires it in your contract. Some firms keep records well beyond the statute period. They may have been involved in a storied project and hope to be called back by the Owner if required. They may be the go-to designer for a particular client and want to be ready to assist this client any time they are called upon for help with an older project.
While the statute of repose in your state gives you a good guideline for how long to keep project documents, that’s only half the battle. The other half is determining what records to keep.
Fortunately, your firm does not have to keep all of its records for five or even ten years. In fact, it is often best for your firm not to keep everything. The reason is “discovery.”
Discovery is a legal process that allows opposing attorneys to access your firm’s records related to the project being litigated. All, in this case, means every plan, every schedule, every discovery can turn up some ugly surprises if a firm has not taken a consistent and systematic approach to record retention and disposal. True dynamite in a plaintiff’s attorney’s hands are copies of informal communication among team members. Informal correspondence, such as e-mails or memorandums, can include provocative remarks about a client or project, or raise questions about the quality of work performed.
The solution to limiting discovery is to develop and enforce a companywide record retention policy that clearly states what kinds of records are to be retained, sets out schedules and methods for record destruction and outlines how and where records are to be stored.
10 Rules For Record Retention
While there is no single record retention program that fits all companies, there are some rules of thumb you can follow. Talk with your attorney about the following 10 suggestions:
1. Put your record retention plan in writing and communicate it to all employees. Clients should also be informed of your policy.
2. Identify the types of documents that should be retained. These may include contracts, drawings, specifications, calculations, reports, quality reviews, approvals, design criteria and standards, advisory letters, product research, submittal logs, site visit reports, change orders, close-out documentation and key correspondence with contractors, owners or agencies. The policy may dictate different retention policies for different types of documents. For example, some firms retain final hard copy drawings and specifications indefinitely while destroying most insignificant correspondence soon after project completion.
3. As a general rule, working documents, early drafts, and informal notes should be scheduled for destruction soon after the final documents are created. These early versions may contain incomplete or inaccurate information that could be discovered and used to mislead a judge or jury.
4. Require that employees aggressively manage e- mail and text messages according to company policy. Generally, most e-mail and text correspondence can be purged after relatively short periods.
5. Do not allow employees to archive company records offsite. A forgotten box of correspondence in an employee’s garage is as subject to discovery as records found in a company filing cabinet or on the firm’s computer network.
6. Ensure that your retained documents are stored in an organized manner, with clear labeling and dates. They should be kept in a clean, secure, and easily accessible location.
7. Archive electronic records on an appropriate storage medium and keep a backup copy offsite. Remember, however, to destroy all backup copies in accordance with your record retention policy.
8. Suspend the destruction of records for a project in the event of possible, pending or ongoing litigation. Continuing to destroy project documents when you know a claim is imminent can be interpreted as an attempt to eliminate damaging evidence.
9. Destroy outdated records as completely as possible. Discarded papers may be retrievable, so be sure that they are destroyed through shredding, burning or other irreversible methods. Consult with information system specialists to determine the most permanent method of deleting electronic data from your computer network.
10. Ensure that your record retention plan is consistently applied across all projects. Courts have shown a willingness to accept a company’s explanation that records were destroyed in accordance with the company’s record retention policy when the firm can show that its policy was consistently implemented. If there is a valid reason to deviate from the policy for a particular project, ensure that the reason is well-documented. It is crucial that all employees are aware of, understand, and are accountable for implementing your firm’s record retention policy.
Using the applicable statute of repose as your guide, it is highly recommended that you establish and then enforce a formal record retention policy. Have it thoroughly reviewed by legal counsel. Such a system can go a long way toward eliminating the clutter of unnecessary paperwork while ensuring appropriate records are maintained in the event of a future dispute or claim.
Current Statutes of Repose
| State | Statute of Repose |
|---|---|
| AL | 7 yrs |
| AK | 10 yrs |
| AZ | 8 yrs |
| AR | 5 yrs property, 4 yrs injury |
| CA | 4 yrs patent, 10 yrs latent |
| CO | 6 yrs |
| CT | 7 yrs |
| DE | 6 yrs |
| DC | 10 yrs |
| FL | 7 yrs |
| GA | 8 yrs |
| HI | 10 yrs |
| ID | 6 yrs |
| IL | 10 yrs |
| IN | 10 yrs |
| IA | 15 yrs |
| KS | 10 yrs |
| KY | 7 yrs |
| LA | 5 yrs |
| ME | 10 yrs |
| MD | 10 yr limit plus 3 yr repose |
| MA | 6 yrs |
| MI | 6 yrs |
| MN | 10 yrs |
| MS | 6 yrs |
| MO | 10 yrs |
| State | Statute of Repose |
|---|---|
| MT | 10 yrs |
| NE | 10 yrs |
| NV | 6 to 10 yrs, varies |
| NH | 8 yrs |
| NJ | 10 yrs |
| NM | 10 yrs |
| NY | None |
| NC | 6 yrs |
| ND | 10 yrs |
| OH | 10 yrs |
| OK | 10 yrs |
| OR | 10 yrs |
| PA | 12 yrs |
| PR | 10 yrs |
| RI | 10 yrs |
| SC | 8 yrs |
| SD | 10 yrs |
| TN | 4 yrs |
| TX | 10 yrs |
| UT | 6 yrs contract, 12 yrs tort |
| VT | None |
| VA | 5 yrs |
| WA | 6 yrs |
| WV | 10 yrs |
| WI | 10 yrs |
| WY | 10 yrs |