Originally published August 2011
Keywords: electronically stored information, ESI, workforce reduction, destruction of data, litigation hold
A large company announces a reduction in force of several thousand employees. The company's head of litigation knows that at least some of those soon-to-be-terminated employees are subject to a litigation hold and wants to ensure that data is not lost or misplaced as a result of employees leaving the company.
Planning for Employee Departures
Regardless of the reason for an employee's departure, it is likely that an employee in career transition is not thinking about the employer's legal obligation to preserve electronically stored information (ESI). Likewise, the IT department is focused on managing assets (e.g., PC's, laptops, PDA's) and server space (e.g., email servers, personal drives on network), and views an employee departure as an opportunity to reduce IT-related costs. Nevertheless, a company's obligation to preserve ESI relating to current or anticipated litigation remains in place regardless of any workforce reduction.
Courts and regulators have increasingly focused on the risk of destruction of data of departing employees who were subject to a legal hold, and they both require that companies make good faith, reasonable efforts to preserve ESI of departing employees that is subject to a legal hold. Therefore, it is important for a company to implement procedures aimed at preserving, and collecting if necessary, ESI associated with its departing employees.
The Employee Left, but Not the Laptop
While it is common for companies to reuse electronic equipment after an employee leaves the organization, doing so can result in the inadvertent destruction of ESI subject to a legal hold. IT departments managing a company's computers, storage devices and "smart phones" or similar devices often do not learn that information stored on a departing employee's device may be subject to a legal hold until after the equipment has been wiped clean and reissued.
One way to preserve ESI while promoting the reuse of company equipment is to institute a waiting period before reintroducing previously used electronic devices back into the current workforce. The exact length of any waiting period depends on the size and culture of the company, but it should be long enough to allow for the company to determine whether any departed employees were subject to an existing legal hold. The waiting period should also provide sufficient time to coordinate any data preservation measures if needed.
During this waiting period, a company should not delete any of the departing employee's emails or other ESI. Ensuring your company has enough time to determine whether it should preserve a former employee's electronic data before reusing the electronic equipment (or deleting the data) is an excellent way to help avoid the inadvertent destruction of ESI.
If possible, the company should develop standard operating procedures around the management of ESI of departing employees, so that the business, IT, records management, compliance and legal department each has a clearly defined role in making sure that ESI that should be retained, is retained, and, equally as important, that any ESI that need not be retained is destroyed in a timely manner consistent with the organization's document retention policies.
Alert New Employees that a Litigation Hold Is In Place
Another risk is when a new or reassigned employee enters into a situation unaware that a legal hold is in place. Therefore, it is important to promptly identify those new employees who inherit data subject to a legal hold. That new, or reassigned, employee should be informed of the company's obligation to preserve the data in the former employee's files and, if applicable, any continuing obligation to preserve future information moving forward.
Keep Litigation Hold Lists as Current as Possible
A company's personnel will not likely remain static for the duration of a lawsuit or investigation. Thus, companies should periodically review their litigation hold lists to determine whether any departed employees remain among the listed document custodians and, if so, whether any new employees who took possession of the departed employee's data should be added to the list. Companies that do not maintain lists of employees subject to a legal hold should consider implementing a process to retain this information in a convenient and accessible manner.
Investigate ESI Issues through Exit Interviews
Regardless of whether a company maintains a list of all employees who may be subject to a legal hold, it is prudent to institute a practice where all departing employees are asked prior to leaving whether their data is subject to a legal hold. Not only does this provide an opportunity to confirm where the data resides, but it also prompts the company to be alert to preserving a departing employees' information while transitioning employees out of the company. If the departing employees' responses are documented, this helps to create a record of the company's good faith efforts at preserving ESI.
In certain circumstances, a legal hold may extend to information stored on an employee's personal email, home computer, or other personal peripheral devices. For this reason, companies should also ask whether the departing employee ever used personal email or personal storage devices (such as thumb-drives) to store company ESI that is subject to a legal hold. With this knowledge, companies are better equipped to determine whether additional steps may be needed to preserve such data to ensure compliance with an existing legal hold.
Collecting ESI in Advance of the Downsizing
Corporate downsizing can put any company in a temporary state of flux. However, a company's ongoing duty to comply with legal holds remains unaffected. Consider taking proactive steps during this period to ensure that ESI is not accidentally lost along the way. These steps could include:
- Backing up the electronic data of employees subject to a legal hold in advance of any downsizing event;
- Collecting responsive ESI from departing employees; and
- Promptly revoking any former employee's ability to access company email or electronic devices immediately upon termination in order to prevent the accidental (or intentional) deletion of ESI by employees whose interests may no longer be aligned with the company's.
Dealing proactively with departing employees' ESI is good records governance regardless of any legal holds; however, the stakes are raised considerably when the ESI is subject to such a hold. When ESI subject to a legal hold goes missing, courts can respond by issuing sanctions and regulators can respond by refocusing their investigation on the company's compliance with subpoenas. Departing employees can compromise a company's ability to comply with its obligation to preserve responsive data. Therefore, companies should consider taking steps to ensure that changes in the makeup of its workforce do not impact the company's ability to satisfy its obligation to preserve ESI.
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.