How do you responsibly separate personal electronic records from business records that have be commingled? Electronic records can have legal, tax, financial as well as sentimental value.
Recently the CEO of a company approached me. She had heard me talk about business records, the problems of bring-your-own-device and related topics. I had said that when an employee like a CEO departs employment, the employer may demand the CEO’s email, text and smartphone records. The employer may, with justification, claim the records are its property if they were created in the course of employment.
The CEO was concerned that over the years she had commingled her personal electronic records with her business electronic records. She was concerned about records in email accounts, smart phones, Dropbox accounts and the like.
The CEO wanted to separate her old business records from her old personal records. The former belong to the company; the latter belong to her.
No dispute or litigation was pending or anticipated. She just felt – correctly – that both she and her company would be better off if her business and old personal records were separated now, before the end of her tenure as an employee. She inquired how to do this in a legally-defensible way.
My reply to her was that evidence law respects a controlled, disciplined process. As electronic records are transferred from place to place in the ordinary course of business, law is less likely to be suspicious if the transfer is managed under a controlled, disciplined process.
So what is a controlled disciplined process for her situation? I suggested she start with a written procedure. The written procedure would guide a neutral employee or consultant through the process of separating the records into two groups. The employee or consultant would be someone who has no incentive to destroy or manipulate records.
As the agent reviews the old records and performs the process of separating them into two buckets, the agent would keep written logs showing when he did the work, how he did it and what the results of the work were.
This controlled, disciplined process would reasonably well create an audit trail to establish that the records had been fairly, rationally separated. Thus, in the future, when the CEO leaves employment at the company, she can show she has left all the business records with the company, while taking her personal records with her.
Further, if the agent encounters an issue about how to separate
particular records, the agent should make a memo explaining how the agent resolved the issue. In some cases, resolution might mean putting a copy of the specific record in both the personal bucket and the business bucket.
On what authority do I base my controlled-disciplined-process suggestion? One example is Revenue Procedure 97-22 published by the Internal Revenue Service.
IRS expects taxpayers to retain reliable evidence of business transactions so that income and other taxes can be assessed. Historically an example of reliable evidence might be an original paper invoice.
Yet under Revenue Procedure 97-22 IRS recognizes that tax evidence may be transferred from one format to another . . . so long as the transfer adheres to a good process. Revenue Procedure 97-22 explains that a good process must institute controls and discipline to reasonably ensure that the final form of the evidence is reliable and true to the original evidence.
For instance, Revenue Procedure 97-22 recognizes that original paper records like invoices may be transferred to digital image format under a process that ensures no evidence is lost and the final image accurately reflects the original paper. Then the paper can be destroyed.
A written, controlled, disciplined process is more likely to persuade not only a court or the IRS, but also the CEO’s employer, that records were separated in a trustworthy way.
The type of controlled, disciplined process described above need not necessarily be implemented manually by a human agent. In the future it could be implemented by competent automation or artificial intelligence. If you the reader have seen such automation or AI, please tell me about it. Please leave a comment or send me an email.
The BYOD and BYO-Online-Account Problem
Recently the CEO of a company approached me. She had heard me talk about business records, the problems of bring-your-own-device and related topics. I had said that when an employee like a CEO departs employment, the employer may demand the CEO’s email, text and smartphone records. The employer may, with justification, claim the records are its property if they were created in the course of employment.
Commingled Records
The CEO was concerned that over the years she had commingled her personal electronic records with her business electronic records. She was concerned about records in email accounts, smart phones, Dropbox accounts and the like.
How to Separate Commingled Records?
The CEO wanted to separate her old business records from her old personal records. The former belong to the company; the latter belong to her.
No dispute or litigation was pending or anticipated. She just felt – correctly – that both she and her company would be better off if her business and old personal records were separated now, before the end of her tenure as an employee. She inquired how to do this in a legally-defensible way.
Legal Standard: Controlled, Disciplined Process
My reply to her was that evidence law respects a controlled, disciplined process. As electronic records are transferred from place to place in the ordinary course of business, law is less likely to be suspicious if the transfer is managed under a controlled, disciplined process.
So what is a controlled disciplined process for her situation? I suggested she start with a written procedure. The written procedure would guide a neutral employee or consultant through the process of separating the records into two groups. The employee or consultant would be someone who has no incentive to destroy or manipulate records.
Written Logs of Execution of the Process
As the agent reviews the old records and performs the process of separating them into two buckets, the agent would keep written logs showing when he did the work, how he did it and what the results of the work were.
This controlled, disciplined process would reasonably well create an audit trail to establish that the records had been fairly, rationally separated. Thus, in the future, when the CEO leaves employment at the company, she can show she has left all the business records with the company, while taking her personal records with her.
Further, if the agent encounters an issue about how to separate
particular records, the agent should make a memo explaining how the agent resolved the issue. In some cases, resolution might mean putting a copy of the specific record in both the personal bucket and the business bucket.
Authority for Controlled, Disciplined Process
On what authority do I base my controlled-disciplined-process suggestion? One example is Revenue Procedure 97-22 published by the Internal Revenue Service.
IRS expects taxpayers to retain reliable evidence of business transactions so that income and other taxes can be assessed. Historically an example of reliable evidence might be an original paper invoice.
Yet under Revenue Procedure 97-22 IRS recognizes that tax evidence may be transferred from one format to another . . . so long as the transfer adheres to a good process. Revenue Procedure 97-22 explains that a good process must institute controls and discipline to reasonably ensure that the final form of the evidence is reliable and true to the original evidence.
For instance, Revenue Procedure 97-22 recognizes that original paper records like invoices may be transferred to digital image format under a process that ensures no evidence is lost and the final image accurately reflects the original paper. Then the paper can be destroyed.
Persuade the Employer
A written, controlled, disciplined process is more likely to persuade not only a court or the IRS, but also the CEO’s employer, that records were separated in a trustworthy way.
Future: Artificial Intelligence
The type of controlled, disciplined process described above need not necessarily be implemented manually by a human agent. In the future it could be implemented by competent automation or artificial intelligence. If you the reader have seen such automation or AI, please tell me about it. Please leave a comment or send me an email.
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