By Chris Farmer. NFDA General Counsel 

As we move toward the season where we start organizing our documents for the tax man, it is important to remember to check your document retention schedule and make sure you are on track. If you don’t have a document retention schedule, it’s time to get one!

The first question I get when discussing retention of documents is, Can I keep them electronically, or do I have to keep paper copies? The answer I give, in the classic lawyerly way, is, it depends.

First, it’s important to know that the U.S.federal government passed the U.S. Electronic Signatures in Global and National Commerce (ESIGN) in 2000. This made electronic signatures legal in every U.S. state and territory, and on the same level as handwritten signatures, when federal law applies.

Additionally, every state, except New York, and the District of Columbia, the U.S. Virgin Islands, Puerto Rico have passed a version of Uniform Electronic Transactions Act (UETA). This law states that a record or signature may not be denied legal effect or enforceability solely because it is, or was made, in electronic form. If a law requires retention of a document or a signature, an electronic version satisfies the law.

It is important to know, however, that the UETA does allow for a government or agency to make rules that overrule this default provision and to require a writing or document to be hardcopy, or a signature to be in person, and not electronic.

Some states have exceptions for documents related to wills, codicils or testamentary trusts, and certain transactions such as real property, among others. You need to check your state to see if any exceptions apply.

While we know electronic documents are acceptable, generally, it is important to remember that if you do reduce your documents to an electronic format, you need to make sure that those electronic files are accessible, readable, and complete. For example, you need to make sure that your scans are readable, not blurry, and include the back of documents, along with all pages, notes, and even under sticky notes (this is a common issue)!

So now that we know how we can store documents, for how long do we need to keep them? This depends on the jurisdiction and the document to be retained. Unless a specific state law applies, the following retention schedules generally apply:

• OSHA Documents:
  • Formaldehyde Monitoring Records: 30 years
  • Employee OSHA Training Records: 3 years
  • Employee Medical Records: 30 years (after last date of employment)
• Personnel Records 
  • Wage and Hour Logs: 3 years
  • Personnel Decisions (Hire/Fire): 2 years
  • Payroll Records: 6 years
• Accounting Documents
  • Bank Statements and Deposit Slips: 6 years
  • Checks: 6 years
  • Expense Reports: 4 years (after date tax return is filed)
  • Monthly Trial Balances: 3 years
  • Vouchers for Payments to Vendors, Employees, etc.: 3 years
  • Subsidiary Ledgers Including Payables and Receivables: 6 years
  • Audit Reports and Financial Statements: Permanent
  • General Ledgers and Journals: Permanent
  • Tax Returns: Permanent
• Insurance Documents
  • Accident Reports: 6 years
  • Fire Inspection Reports: 6 years
  • Group Disability Records: 6 years
  • Safety Reports: 6 years
  • Claims (after settlement): 3 years
  • Expired policies: 3 years
• Corporate Records
  • Bylaws, Charter and Minute Books: Permanent
  • Capital Stock and Bond Records: Permanent
  • Checks Regarding Payment for Property and Major Capital Improvements: Permanent
  • Copyright and Trademark Registrations: Permanent
  • Deeds and Easements: Permanent
  • Retirement and Pension Records: Permanent
  • Tax Returns, Supporting Documents: Permanent
  • Expired Mortgages, Notes, Leases: 6 years

Some states have specific requirements for different documents, including funeral service-related documents. When it comes to most cemetery documents, I recommend keeping them indefinitely. Additionally, as a general rule, you should keep the documents at least for as long as you could be sued to be able to protect yourself.

It is important to remember that you need to make sure and be consistent in your document retention and destruction policy and how you apply it. Inconsistent application to policy and mass deletions off schedule could raise questions about your motive in doing so. While you may not know it, if you anticipate litigation you have legal duty to preserve all relevant documents and evidence and if you breach this duty you could be subject to sanctions by the court or even a directed verdict that the other side wins because you did not preserve documents that were relevant to the issues in the case.

Having a good document retention and destruction schedule is important in any business. Check with the requirements in your jurisdiction and with your finance and legal professionals before making any changes, and good luck with the tax man.