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FAQ : Can you implement legal hold in Office365?

Yes. I had this question again yesterday so I thought I'd cover it off today.

Litigation hold, also known as legal hold, allows organizations to preserve electronically stored information. When a user's mailbox is put on litigation hold, the user can delete items from their mailbox but the items are retained on the servers in the Microsoft Exchange datacenter. Litigation hold retains e-mail messages, calendar items, tasks, and other mailbox items. Litigation hold also protects the original version of each mailbox item from modification by the user. If a user changes the properties of items in a mailbox on litigation hold, a copy of the item before it was changed is retained.

To see how we do this in more detail, see https://help.outlook.com/en-us/140/ms.exch.ecp.editlitigationhold.aspx

Litigation hold is a feature of Exchange Online Plan 2 and thus is also included in Office365 Plan E3 and E4.