Unlicensed OneDrive Accounts in Microsoft 365: Clarifying Billing Requirements for eDiscovery—There Are None

On July 26, 2024, the Microsoft 365 Message Center included what seemed like a showstopping announcement: starting in late January 2025 and completing in late March 2025, changes would be made to the storage policy of unlicensed OneDrives.  

Previously, organizations could retain unlicensed OneDrives indefinitely without fees.  The only requirement was applying a retention feature before removing the user’s license or deleting the account.  As long as one of these retention features was in place, the OneDrives of unlicensed or deleted users would be retained and could be managed similar to the OneDrives of licensed users.  For example, the OneDrive could be restored, other users could be granted access, it could be searched using Purview eDiscovery tools, it could be put on a Purview in-place legal hold, and it could be added to Purview retention policies.  Under this framework, the OneDrives of unlicensed or deleted user accounts differed little from the OneDrives of fully licensed users—and importantly—incurred no storage or access fees.

The July 26 Message Center announcement (Message ID MC836942) described a new storage policy that required organizations to set up archive billing for unlicensed OneDrive accounts “to be able to access and edit the archived files.”  The announcement went on to explain that access would require enabling billing—at a fee of $0.05/GB/month for ALL unlicensed OneDrives—and an additional fee of $0.60/GB for each reactivated OneDrive.  Notably, this announcement did not distinguish between business access—being able to access and restore the OneDrive for business purposes (such as granting a new employee access to a former employee’s files) – versus accessing the OneDrive for eDiscovery purposes (for example, retrieving a former employee’s files to respond to a subpoena).  The result of this Message Center announcement was the assumption by many organizations’ IT and legal teams that the unlicensed OneDrives they had been retaining at no charge under Purview in-place legal holds would soon start incurring storage and access fees.

On the same day (July 26) of the Message Center announcement, Microsoft posted to its Learn documentation portal the first version of a technical support article titled “Manage unlicensed OneDrive user accounts.”  The article described the new unlicensed OneDrive storage framework—but, as with the Message Center announcement, it made no mention of Purview eDiscovery. 

On August 9, the article was updated and, for the first time, Purview eDiscovery was mentioned, making it clear that Microsoft’s intent was to trigger, at a minimum, a reactivation fee to access unlicensed OneDrives retained for eDiscovery purposes.  The article did not address ongoing storage fees in the context of Purview eDiscovery.

Fast forward to April 16, 2025, the last date the “Manage unlicensed OneDrive user accounts” article was updated.  While this version of the article more fully addresses accessing unlicensed OneDrive accounts using Purview eDiscovery, it was still unclear on whether OneDrive access strictly for eDiscovery would incur storage and reactivation fees.  Unfortunately, many legal and IT professionals interpreted the article to mean—incorrectly—that paying for storage and access for unlicensed OneDrives was required even when the only reason for retaining them was for eDiscovery purposes.

In Redgrave’s reading of the April 16 version of the support article, the conclusion we came to is no, storage and access fees are not required for organizations needing to retain the OneDrives of unlicensed users strictly for eDiscovery purposes—such as legal holds and data collection (this could also include related reasons such as record retention requirements).  Redgrave confirmed directly with Microsoft’s OneDrive product management team that our understanding of the unlicensed OneDrive storage and access framework is correct, and that organizations that are retaining the OneDrives of unlicensed accounts strictly for eDiscovery (or related) purposes do not need to pay for storing and accessing unlicensed OneDrives.    

Microsoft’s introduction of the unlicensed OneDrive storage and access fee framework was primarily intended to address scenarios where organizations require access to unlicensed OneDrive accounts for business continuity purposes—such as transferring files to a new employee or restoring user access for ongoing business operations.  This type of access is distinct from Purview eDiscovery, which is focused solely on legal, compliance, and records retention needs.  Initially, as reflected in the August 9, 2024, version of Microsoft’s guidance, the policy did not clearly differentiate between business continuity and eDiscovery access, leading to confusion and the assumption that fees would apply universally.  Microsoft has since clarified and shifted its position (as confirmed by Microsoft), however, clarifying that organizations retaining unlicensed OneDrives solely for eDiscovery purposes—such as legal holds, compliance investigations, or records retention—are exempt from storage and reactivation fees, distinguishing these scenarios from business continuity access, which does incur charges.

If you have any questions about this topic, or other Microsoft 365 questions, please reach out to: John Collins, Managing Director [jcollins@redgravellp.com], Staci Kaliner, Managing Director [skaliner@redgravellp.com], or Martin Tully, Partner [mtully@redgravellp.com]. 

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The views expressed in this article are those of the authors and do not necessarily represent the views of their law firm or any of its clients.