All companies face the daunting task of creating and enforcing a records retention policy. This article will present a short summary the records retention issues facing government contractors.
The document retention rules affecting government contractors begin with the FAR. FAR § 4.7 provides that “contractors shall make available records, which includes books, documents, accounting procedures and practices, and other data and other supporting evidence to satisfy contract negotiation, administration, and audit requirements of the contracting agencies.” FAR § 4.703. This section generally requires that a contractor retain such records for three years after final payment under the contract. However, there are exceptions for certain financial information, payroll records, and other documents, for which different retention periods are mandated. Typically, the retention period for such documents will vary between two and four years. FAR clauses incorporated into particular federal contracts can also include retention requirements and, therefore, should be reviewed following award.
Executive Order 11246 also requires government contractors to retain certain records. The specific retention period is found in the regulations authorized by this Executive Order, at 41 C.F.R. § 60-1.12, which states, “Any personnel or employment record made or kept by the contractor shall be preserved by the contractor for a period of not less than two years from the date of the making of the record or the personnel action involved, whichever occurs later.” However, this time period is reduced to one year if the contractor has less than 150 employees or does not have a government contract of at least $150,000. The regulation also provides certain exceptions and additional requirements.
Government contractors should also be aware of the laws of application beyond the government contracting world. These laws are often employment-related and/or governed by the size of the company. It is important to consult counsel to determine exactly which laws may apply. Some laws which may apply include the Fair Labor Standards Act, the ADA, Title VII of the Civil Rights Act of 1964, the Davis-Bacon Act, the Contract Work Hours and Safety Act, and the Service Contract Act. Additionally, companies should be aware of how the different tax laws affect their retention policies.
Another piece of the records retention puzzle is how to handle electronic records. Many laws have no provision for electronic storage of such records, as the law has not kept pace with the technology of records retention. However, the FAR specifically addresses the issue and permits original documents to be converted to electronic files provided certain conditions are satisfied, such as proper indexing, inclusion of imaged signatures and retention of hard copies for at least one year. The FAR should be reviewed for further details.
The electronic records issue also encompasses records that originate in an electronic format, such as e-mail. This type of record is less likely to fall under one of the above-mentioned statutes, but retains vital importance in any records retention policy. Due to its seemingly informal nature, employees often leave extremely unfortunate communications in the permanent electronic record, ripe for discovery in any ensuing litigation. It is important that any records retention policy instruct, and constantly remind, employees that they should not put anything in an e-mail that they would not put in a formal letter.
Additionally, it is extremely important to retain all records (electronic or hard copy), during a pending litigation or investigation. Deletion of seemingly innocuous documents may carry harsh penalties for the company and the individual, not the least of which may be a finding of spoliation and an adverse inference that the deleted record was incriminating.
In conclusion, small businesses should develop an awareness of the document retention laws that may affect that business and develop a document retention policy that meets these requirements. This article touches upon the requirements that are generally applicable to federal government contractors. Depending on the specific industry of each individual company, there may be other applicable laws, each with their own mandates for records retention, especially if the company is in a highly regulated industry.