How to Retain Employee Records
Author: Cheryl Lipton, The GhostWriters, Ltd.
Poor records management can cost an organization in two primary ways:
- Failure to keep required records can result in fines or other punishments from the government; and
- Failure to retain records of an investigation, claim or complaint can doom a case.
Accordingly, most companies have detailed document retention policies and schedules that should be followed carefully. In determining proper recordkeeping procedures, the following considerations should be addressed: (i) what to keep and for how long; (ii) what needs to be kept confidential; (iii) where to store records; and (iv) how to destroy the documents that no longer need to be kept.
Whenever in question, the best practice is to ask counsel before destroying any document, especially if it is regarding a contentious employment decision that may lead to litigation.
Step 1: Make a Records Inventory
A record is something that an employer needs to keep for a set period of time, either for regulatory, legal or business reasons. As a first step, it is necessary for an employer to classify what types of documents it has. The easiest way is to create a records inventory.
The records inventory should list the types of documents, the location of the documents and the volume of each type of document the organization has. However, the records inventory is not a list of specific documents.
An inventory will help the employer keep track of records and be able to locate and manage them. The inventory should include both active documents and ones that are no longer being used but still need to be retained under the law.
Step 2: Manage Personnel Files
Contents of the File
Employee personnel files must be current and complete. The types of documents that need to be in the personnel file are those relating to employment decisions, payroll, benefits, training and performance. Information that may be requested as part of an external investigation, such as I-9 records, health and safety documents, and payroll records, should be maintained in a separate file that is easily accessible if needed. This will allow for easy retrieval and discreet handling of confidential or private information. As a best practice, I-9 records should be accessible only to HR professionals and be kept in a single separate file.
Certain employee documents should never be kept in the personnel file: medical records, genetic information and investigation records (including polygraphs). These records must be kept in separate files. Documents contained in the employee's personnel file should be reviewed periodically and at least annually to ensure that everything is current, accurate and complete.
While an employer should include all the documents required by law, an employer must refrain from including everything in the personnel file. Unnecessary or unsubstantiated references or criticisms to an employee's private life, political beliefs, race, sex or religion must be avoided. A good rule of thumb: if an employer would not want a jury to see or hear it, then an employer should not include it.
Access to the File
Many states have statutory requirements that permit employees to review the contents of their personnel files. To comply with these statutes, employers should have policies or practices that allow the organization to easily locate personnel files in response to a request from the employee or an employee representative who is legally permitted to request such files, which should conform to applicable state laws.
Step 3: Make a Records Schedule
Different laws have different requirements for how long a document must be retained. Federal laws require a minimum number of years that a record must be retained, starting from either the date the record is made or the personnel action is taken, whichever is later. In many instances, if a claim or lawsuit has been filed, all relevant records should be kept until the final disposition of the charge or lawsuit. Employers should make a records schedule based on a guide such as an employee records retention chart.
Step 4: Store Documents
When reviewing how long to retain records, employers should also consider the storage format of their records. Employers should consider whether hard copies will be kept on site or at a remote location. Documents maintained electronically may not be easily retrievable either because the storage media has deteriorated or become obsolete, or because the information was generated using a format that is no longer readable. Thus, recovery of documents may prove to be impossible or exceedingly expensive.
Employers should maintain information subject to federal laws, such as I-9 records, health and safety documents, and payroll records, in a convenient location for easy retrieval.
Step 5: Destroy Records
When destroying employment-related files, employers should shred or dispose of records in an irretrievable manner, including documents collected as part of an employee background check. Employers should dispose of documents containing individual identifiers, such as Social Security numbers or bank account information, in a secure manner.
Employers should create written logs identifying what information was destroyed and when, including when electronically stored information was destroyed.
Step 6: Keep Certain Information Confidential
Confidentiality of employee records is necessary to avoid potential liabilities from impermissible access or use of information in employee files. Employers should not only consider what employment records are being kept, but also whether certain records should be kept in separate files or maintained on a strict "need-to-know" basis.
Certain federal statutes, including the ADA, FMLA, OSH Act, IRCA and GINA, require that information protected by these laws may not be disclosed generally throughout the workplace or used for reasons other than the reason the information was provided by the employee. Therefore, employers should maintain confidential information about employees, including medical information and I-9 documentation, in files that are separate from ordinary personnel files.
Third Party Issues
Employers face potential liability from former employees, including possible claims of defamation, retaliation or interference with prospective employment opportunities, if more extensive information about an employee was disclosed to a third party without the employee's consent.
Employers should develop consistent policies and practices for responding to third-party requests for information about employees, such as reference checks, requests from lenders, or subpoenas. Such procedures may include, for example, a requirement that employees must authorize in writing the disclosure of information about an employee that is more extensive than dates worked and job titles. Even when the disclosure of information is allowed or has been authorized by an employee, the employer should take care to limit the information disclosed to only that which is responsive to the request. See Employee Communications > Communicating Sensitive Information.
Step 7: Minimize Potential Liability
Employers should retain and preserve employee records - including electronic records, such as emails - at the earliest possible opportunity, possibly even before a lawsuit is filed. A court may find that an employer has an obligation to identify, locate and preserve relevant records as soon as the employer should have reasonably understood that it will face litigation.
When a charge is filed with an agency, such as the Equal Employment Opportunity Commission (EEOC), the employer is required to maintain a record relating to the issues raised in the charge until the matter has been resolved.
Litigation or Legal Holds
Employers should consider implementing a "litigation hold" or "legal hold" policy that would require certain employment records to be preserved in anticipation of a potential lawsuit. An employer who fails to gather and preserve records, communications or other documents that are potentially relevant to a legal dispute (and thus subject to a court order) could have a more difficult time establishing its position in litigation and may face court sanctions or other penalties. On the other hand, an employer's compliance with a written document retention schedule can show that certain records were simply destroyed in the regular course of business, and not, by contrast, in an effort to "cover up" potentially harmful facts.
If an employer is concerned that a departing employee may have violated a noncompete agreement or engaged in unfair business practices prior to leaving to join a competitor, the employer will want to ensure that the contents of the employee's mobile devices, including a laptop hard drive or personal digital assistant (PDA), are not erased after the employee returns this type of electronic equipment.
The employer's instructions regarding its efforts to locate and preserve records should be made in writing and should be retained for the purpose of demonstrating that the employer complied with its potential duty to preserve evidence.