If you run a small business, one thing you should know about is a legal hold process. But what is this and how can you prepare for it? Here’s everything you need to know about a legal hold.
Overview of a legal hold
A legal hold, sometimes also called a preservation order, is quite common these days. It involves the legal department sending a notification to everyone at the organisation who is affected informing them that they are legally obliged to preserve documents, both physical and electronic.
Once the notice is served, the standard practices for dealing with records are suspended. For example, if you have a document destruction process, you might have to suspend this and ensure proper document storage is in place.
This is to preserve any information that could help in a dispute. This information needs to be protected in a bid to prevent the evidence from getting spoiled until it is collected and can be used in the recovery process, or until the case is resolved.
Why is a legal hold initiated?
A legal hold is initiated when your organisation is expecting litigation or where litigation has already begun. But it can also be initiated due to an upcoming audit or investigation.
The legal hold should be initiated quickly, as soon as the event occurs. For example, if someone is injured on the property or a letter is received that threatens litigation, the legal hold should be initiated straight away.
What is the process?
As soon as litigation is threatened, or an audit is announced, the hold notification is sent. The legal hold is usually started by a written notification by the legal department to anyone involved.
The notice provides instructions to custodians instructing them to preserve any information that might be required for discovery. The legal department must know that the custodians have not only received the notification but also that they have understood it and have agreed to comply.
Hold notices should, therefore, be straightforward and easy to understand so there is no confusion. It’s usually best to use a standard template that contains all the information.
The information needs to then be preserved and collected for discovery. Any processes that lead to data disposal are suspended so that the data is available before litigation begins.
What types of information must be preserved?
The types of information that need to be preserved include paper files like documents. But a lot of information these days is electronic, often referred to as electronically stored information (ESI). This includes emails, communications, instant messages, multimedia, digital files, images, scans, videos and more. ESI can be stored in various places including desktops, mobile devices and data centres. Dealing with a records management provider that can handle hard and soft copy storage is essential.
Careful planning is essential
You must be able to show that proper care has been taken to preserve digital evidence; this is important even if you are unlikely to see litigation. You should still be prepared and understand what’s involved so you can take action if you need to.
Consequences can be serious if you fail to do this, and you need to ensure compliance so that any relevant information is retained and is available to help resolve disputes.
Many companies use spreadsheets to track notifications, responses and progress, but this takes a lot of time and is not always accurate. It can be even more challenging in complex cases. A legal hold could last for years, and you may have numerous legal holds at the same time. Custodians might also leave the organisation during the process.
The process can be automated using software where a formal notice is sent to all custodians and their results are tracked.
If you do not carry out the legal hold process properly, this can be very risky. Even a short delay can have consequences, so you need to be prepared.
Prepare for the possibility of a legal hold
Your organisation has a responsibility to preserve information when it learns that litigation is pending or likely, or that a regulatory investigation is pending. Make sure you prepare properly. Have a process in place to inform custodians of their duty to preserve information, as well as clear instructions for how they should do this, and avoid any problems in the future.
Want to know what a legal hold process is and how your business can implement one? Speak to one of our experts today.
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