Enterprise information continues to grow in volume and variety. For human resources documents and data in particular, it’s crucial to keep records for as long as necessary – and no longer. Retaining information for too long is costly and risky, but so is destroying it too soon. Ensuring proper user authorization and access is also crucial. Optimized digital solutions for managing employee files and records enable companies like yours to improve data compliance, increase efficiency, and prepare for potential litigation. Read this whitepaper to understand how SAP Employee File Management can help you achieve the best balance. Read this whitepaper to understand more about SAP Employee File Management by OpenText that can help you achieve this balance.

1. SAP Thought Leadership Paper
Human Capital Management
Document and Data Retention Compliance
Understanding and Addressing the Costs, Risks, and
Legal Pitfalls

2. Enterprise information continues to grow in volume
and variety. For human resources documents and data
in particular, it’s crucial to keep records for as long as
necessary – and no longer. Retaining information for
too long is costly and risky, but so is destroying it too
soon. Ensuring proper user authorization and access is
also crucial. Optimized digital solutions for managing
employee files and records enable companies like yours
to improve data compliance, increase efficiency, and
prepare for potential litigation.

3. Table of Contents
4 The Challenges of Document Retention
Throughout the Employee Lifecycle
5 The Legal Landscape
Document Retention Obligations
Wasteful Discovery Costs
6 The Potential for Litigation – From Hire to Retire
Enabling Data Compliance with SAP® Solutions
About Loeb & Loeb

4. Striking the Right Balance
The Challenges of Document Retention
Throughout the Employee Lifecycle
Managing enterprise information, Keeping data and documents longer The law firm of Loeb & Loeb LLP has
especially HR documents, is complex in than necessary hurts efficiency, increas- broad experience regarding the legal
an environment of burgeoning digital data es cost, and raises the risk of liability. Yet obligations and risks relating to employee
and business networks. Organizations disposal of records in violation of legal records. This paper draws upon this
must strike the right balance to legally obligations to retain them can result in experience to define the legal landscape,
and effectively manage information and fines and damage the company brand. litigation challenges, and costs of non-
keep all the right data for just the right What’s more, a high percentage of records compliance. It also addresses how digital
amount of time. Many firms, however, maintained are of little value, and are, in solutions for managing employee records
retain more records than necessary fact, potential liabilities. Many stored files and files can help.
or have inappropriate access and autho- are duplicates, increasing storage and
rization controls. As the amount of infor- litigation discovery costs.
mation – including social media, blogs, Leading organizations are employing
instant messaging, and text messaging – digital enterprise file management
continues to explode, the problem will solutions to improve data management,
only grow. authorized access, compliance, and
litigation preparedness. These solutions
simplify the management of all paper
and electronic worker-related documents
and files by supporting their integration,
storage, retrieval, and archiving. As a
result, they enable you to meet your legal
obligations and reduce the risks and
costs of compliance.
SAP Thought Leadership Paper – Document and Data Retention Compliance
4

5. Understanding Retention Regulations and Costs
The Legal Landscape
Document Retention include the Immigration Reform and For example, in the 1990s a corporation
Obligations Control Act (IRCA), state wage and hours purchased a Pennsylvania-based firm
laws, and laws concerning employment that was shut down soon after the acqui-
Scores of regulations dictate which agreements. sition. In litigation a decade later, lawyers
records you must keep and for how long. Companies have a duty to preserve requested records belonging to the
Title VII of the Civil Rights Act prohibits documents that may be related to ongoing now defunct company. After discovering
discrimination based on race, color, reli- or pending litigation. The obligation to that over 10,000 boxes of records still
gion, sex, and national origin. Under Title preserve evidence arises when a party existed at an off-site facility, the parent
VII, companies have to retain relevant knows or reasonably should know that company was forced to spend more than
personnel or employment records for one the evidence is relevant to current or US$2 million searching and culling these
year. These records include application reasonably likely future litigation. The records to just six boxes of pertinent
forms; hiring, promotion, demotion, eradication of “smoking gun” documents information. As it turned out, this infor-
transfer, and termination records; and once a potential discrepancy is discovered mation neither helped nor hurt the plain-
terms of compensation. can be interpreted as obstruction of tiff’s case – but the discovery expenses
The Age Discrimination in Employment justice. While not every shred of paper or for the defendant were considerable.
Act (ADEA) also calls for companies to electronic document must be retained, a Similarly, the defendant in a recent
retain personnel or employment records party must not destroy unique relevant discrimination case was ordered to
for one year. These include job appli­ evidence. Once litigation is reasonably produce some 70,000 e-mails that had
cations, resumes, and failure-to-hire anticipated, an organization must matches in a keyword search. For this
records; hiring, promotion, demotion, suspend its routine document retention single-plaintiff case, the cost of providing
transfer, and termination records; and and destruction policies and place a the e-mails was over US$250,000.
agency, union, and job orders. In addition, litigation hold on relevant evidence.
for three years companies must keep
payroll and other records containing Wasteful Discovery Costs
each employee’s name, address, date
of birth, occupation, rate of pay, and Regardless of their disposition, litigation
compensation earned per week. cases can impact the bottom line. Signif-
The Fair Labor Standards Act (FLSA) icant costs can be incurred through the
has similar requirements covering docu- discovery process, in which the organi­
ments from employment and earnings zation must produce relevant data and
records to payrolls and contracts, while documents. These expenses often are
the Family and Medical Leave Act (FMLA) accepted as the cost of doing business –
is concerned with employee leave and even though they frequently can be
benefits records. Other regulations reduced or avoided.
SAP Thought Leadership Paper – Document and Data Retention Compliance
5

6. Recent Document Retention Cases
The Potential for Litigation – From Hire to Retire
The failure to establish or follow policies In Connecticut in 2001, an applicant for a Fines assessed in cases like these can add
for shredding HR-related records can teaching position brought a failure-to-hire up quickly. Under Immigration Reform
result in the retention of large amounts claim for age discrimination under ADEA. and Control Act (IRCA) regulations,
of unnecessary data and documents. The court granted adverse inference employers that fail to maintain onboarding
And the risk and cost potential for to the plaintiff due to the absence of records such as INS Form I-9 are subject
litigation spans the employee lifecycle, requested evidence from the school. to civil penalties ranging from US$100 to
from recruiting, reference checks, and The school lost its case because it did US$1,100 for each violation.
onboarding to maintenance, perfor- not retain the proper documents relating The risks also extend to documents
mance, and separation. to the hiring process, such as applications, maintained overseas. In 2009 a federal
If policies are in place and followed, rankings of candidates, and references. court compelled a Delaware corporation
however, companies can legally and A group of employees terminated in New to produce electronic records created
ethically dispose of their HR-related York in 2003 alleged wrongful dismissal and stored outside of the United States.
documents in a timely fashion – reducing due to age discrimination, while the In recent, separate cases spanning a
the potential for future harm, cutting employer claimed it was due to poor decade, three companies had to produce
storage costs, and improving efficiency. performance. The employer lost the claim potentially relevant evidence related to
The following are some examples of because it failed to retain documents employee records from a foreign parent
record retention and destruction litiga- showing evidence of poor performance, or affiliate for a U.S. lawsuit.
tion cases. including notations correcting employee Without an integrated enterprise
work and supervisor performance notes. solution, how can companies manage
In 2006 a plaintiff in Connecticut was growing volumes of records and comply
awarded damages for retaliatory dis- with an array of regulations?
charge in violation of FMLA, due to the
defendant’s failure to maintain the notes
from the employee’s doctor. In the same
year, an Ohio corporation was fined for
prematurely destroying records of hours
worked and paid, in violation of FLSA
regulations.
Significant cost can be incurred through the discovery
process, in which an organization must produce relevant
data and documents. These expenses can often be
reduced or avoided.
SAP Thought Leadership Paper – Document and Data Retention Compliance
6

7. Enabling Data Compliance with About Loeb & Loeb Learn More
SAP® Solutions
The SAP® Employee File Management
Much of the content in this paper was
application by OpenText, tightly integrated
The challenges of managing digital provided by Mark Goldberg, a partner in with the SAP ERP Human Capital Manage-
data are many. Storing documents is Loeb & Loeb’s Employment and Labor ment (SAP ERP HCM) solution, helps
expensive and inefficient. Keeping them Practice, and discussed in a Webinar companies improve information manage-
too long exposes the organization to titled The HR Digital Shift – Are You ment and data compliance. Together this
software facilitates conformity with a host
litigation. Destroying data too soon at Risk? Goldberg can be reached at
of regulations and helps ensure that you
brings expensive fines. mgoldberg@loeb.com or 212-407-4925. retain documents and data for the right
With the SAP® Employee File Manage- Loeb & Loeb is a multiservice law firm amount of time to satisfy both ethical
ment application by OpenText, companies with over 300 attorneys in 5 U.S. offices, and legal demands. Automated processes
like yours can enable compliance across as well as a representative office in and alerts facilitate document retention
and destruction, allowing you to reduce
the information lifecycle and address a Beijing, China. For more information,
associated expenses and risk.
range of legal and regulatory challenges. please visit www.loeb.com.
Tightly integrated with the SAP ERP In addition to enabling data compliance,
Human Capital Management (SAP the software helps HR organizations deliver
ERP HCM) solution, SAP Employee File efficient, accurate service. It provides user-
friendly access to enterprise information.
Management simplifies the management
People in roles throughout the organization
of paper and electronic worker-related can find documents quickly with enhanced
documents. Together the solutions search functionality and intuitive folder
support the integration, storage, structures and thumbnails. Employees and
retrieval, and archiving of all workforce managers get secure, role-based access to
files with employee self-service and shared-
documents.
services functionality.
SAP Employee File Management and
SAP ERP HCM enable you to consolidate To learn more, contact your SAP
paper and digital files and collect, digitize, representative or visit www.sap.com
and centralize all employee documents /solutions/solutionextensions
/employee-file-management/index.epx.
and master data in a single repository.
You can securely archive employee
documents in accordance with legal regu­
lations. Records can be automatically
deleted at the proper time, reducing the
risks and expenses of noncompliance.
Integrated workflows automate and
facilitate review and approval processes
and document-related inquiries.
SAP Thought Leadership Paper – Document and Data Retention Compliance
7

8. www.sap.com/contactsap
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