RECORDS MANAGEMENT

Cary F. McGovern Comments
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Every business is concerned about liability in our litigious society. If you provide records-storage services, you can help protect yourself from lawsuits by following a clear set of rules.

Since I’m not a lawyer nor do I play one on TV, I’ll approach this subject with some care. My advice should be viewed from an operational perspective; your own legal counsel needs to review all agreements and contracts. That said, a standard in the commercial records-management industry sets the benchmark: the basic industry contract promulgated by PRISM International, the industry trade association.

Although PRISM won’t give out the contract to nonmembers, it’s relatively easy to get one from members. If you want a copy, simply ask for a proposal from a PRISM member in your community. To find the PRISM roster, go to www.prismintl.org and click on member mall. That will bring you to a selection page and you can choose a state, province or country to search.

Records Storage Vs. Management

A crystal clear line of demarcation separates the service known as records storage from that of records management. All self-storage facilities allow records storage under the terms of their standard self-storage agreement. Business customers may keep records along with equipment and supplies in passive storage at your facility. You have no access to the records except after breach of payment.

In records management, you become the custodian of the business records and the customer no longer has access to them except through you. There is no middle ground.

The following 11 rules are heartily recommended to reduce liability:

1. Never allow joint custody of business records. If both you and the customer have access to the records, you can be assured that sometime in the future you’ll be blamed for missing or lost files.

2. Never take a single box into records management without a signed contract. You assume immediate responsibility for the records when they pass through your portal; accept them without a contract, and you have no protection.

3. Always set the liability limit at $2 per unit of storage. If you set the limitation of liability at a fixed amount, it should refer to something real and tangible. Since we have no idea of the value of a business record in the storage unit, we set it at the cost of the box itself.

4. Always ask if the client requires excess valuation insurance. If the customer requires additional insurance on the business records, you may offer it to them for a fee. Customers have three options: 1) You can sell them additional insurance through a licensed broker; 2) They can seek out coverage on their own; or 3) They can add you as a secondary location of important papers on their existing insurance coverage.

5. Always refer to your “Standard Operating Procedures” in the rules section of your contract. Standard operating rules generally take the form of a “Customer Handbook,” which should include: a brief definition of your services, instructions for packaging, transfer of records, access authorization policy and confidentiality pledges. If your system is available through the Internet, it should feature web-access rules as well. I find it helpful to also include a disaster plant to reinforce your commitment to your customer.

6. Always include an evergreen clause. Evergreen clauses should state that the contract renews automatically if no notification of cancellation is received prior to 60 days before the end of the term of the agreement. This protects your investment in racking and space.

7. Sell the longest-term contact possible. It’s normal to have a multiyear contract for records management. I like five-year agreements best because they allow you to finance some of the initial costs over a 60-month period.

8. Include periodic price increases. The price increase doesn’t have to equal the term. You can have a five-year evergreen agreement with annual price increases. Price increases should be guided by a published number that reflects increases in operating cost. The source must be reasonable and trusted. I recommend tying it to the regional cost of living index published by the U.S. Labor Department at www.bls.gov/cpi

9. Require confidentiality agreements from all employees and contractors. Confidentiality and security are the primary requirements in handling client-business records. It’s imperative to have a training program that emphasizes the care and handling of client records. Each employee or contractor should update a confidentiality agreement annually.

10. Check customer-authorization lists often. Your standard operating procedure should clearly state you’re not responsible for changes to customer-authorization lists. However, you should be proactive in assisting your client to maintain this control. Quarterly updates can be automatically e-mailed to them for easy return to you. Ask your client to include removal from authorization as part of an “exit interview” checklist by human resources.

11. Transfer files sealed in plastic. When transferring files from your location to a customer’s location, it’s important to heat seal the file into a 3-mil poly-tubing roll available from warehouse supply companies. This is an inexpensive but important detail. Some customers may request audit seals to ensure the document hasn’t been disturbed. 

Avoiding liability is a contractual and an operational issue. These rules should help you reduce your risk of liability. 

Cary F. McGovern is the principal of FileMan Records Management, which offers full-service assistance for commercial records-storage startups and sales training in commercial records-management operations. For help with feasibility determination, operational implementation or marketing support, call 877.FILEMAN; e-mail fileman@fileman.com; visit www.fileman.com

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