Employer Recordkeeping

Managing employee information and satisfying legal obligations

Posted on February 18, 2011

Employers typically keep a number of different employee records, often called personnel files, as a way of documenting an employee’s relationship with a company. In certain instances, documentation in a personnel file can provide important supportive data, for example, to show an employee’s discipline history in support of a termination in subsequent litigation. The personnel file can also track performance goals, leaves of absence and any employment-related agreements.

In addition to being a good business practice, employers may be required to keep certain types of employee records in order to comply with specific provisions under both federal and state law. Under the federal Fair Labor Standards Act (FLSA), for instance, nearly all employers are required to keep a set of records that includes basic identifying information about non-exempt employees as well as data about hours worked and wages earned.

Types of Employee Records
A personnel file may contain several types of records, including:

• Basic Information: Employee’s full name, Social Security number, address, and birth date.
• Hiring Documents: Job descriptions, employment applications and resumes
• Job Performance and Development: Performance evaluations, corrective action or disciplinary letters, awards, promotion records and records of education or trainings
• Employment-Related Agreements: Employment agreements, union contracts, non-competition agreements, confidentiality or nondisclosure agreements
• Compensation: Documents related to compensation and benefits information, such as W-4s and beneficiary forms, payroll records and time cards for prior year(s).
• Termination and Post-Employment Information: It is a good idea to keep information related to an employee’s termination on file should a dispute later arise.

Certain records should be kept in a confidential file separate from the personnel file, such as: 

• Medical records or documents that relate to an injury or disability
• Materials relating to workers’ compensation claims
• Family and Medical Leave documents
• Form I-9 and other employment verification information
• Wage garnishment documentation
• Documents pertaining to sensitive matters such as harassment investigation records or any information pertaining to an employee’s religion (such as a request for religious holidays off)

Developing an Effective Recordkeeping Policy
It is important to develop a policy that outlines the procedures for how your company will manage employee records and files. Keep in mind that your policy must comply with federal and state laws. Some states, for instance, require employers to provide employees with access to their files. 

Consider the following points when developing your company’s employee records policy:

What types of records will be maintained?

• Identify documents and forms that should be kept in either a personnel file or confidential file. 
• Establish a regular timeframe for reviewing and updating employment records, as well as for disposing of records that no longer need to be retained.
• Your employee records policy should clearly state which records to maintain and how long certain documents should be kept.

How will employee records be stored?

• Determine what information may be stored electronically as opposed to which records will be maintained in hard copy format.
• All employee records should be maintained in a locked cabinet or locked office.
• Keep records that are required to be kept separate stored in separate files.
• Be sure your filing system is compliant with federal and state laws. 
• Ensure that a secure procedure, such as shredding, is in place for the disposal of employee records.

How will access to records be controlled?

• Identify those who have authorization to access personnel and confidential files. Be certain that safeguards are in place to restrict file access to only those individuals. These safeguards can be physical (such as locked cabinets) or technical (such as special username and password access).
• Define the specific circumstances by which an employee may access or copy files, including the specific records which may be reviewed. Files should be accessed under supervision of management. 
• Generally, employees should not be permitted to remove or change any documents contained in their personnel files. If an employee disagrees with a record, consider allowing him or her to submit a written statement regarding the disagreement and adding it to his or her file.
• Develop procedures for handling third party requests for disclosure of employee information, and what information may be released. Consider obtaining the employee’s prior written authorization to release such information.

Other Considerations
When collecting and maintaining information to be kept in employee personnel files, you should be careful to comply with all applicable federal and state laws, including any requirements as to what information should be collected, what your company may or may not do with that information, and how long employee records should be kept. Additional information on recordkeeping and compliance can be found at individual state   websites, usually under the department of labor page. Federal regulation information is available on the Department of Labor website.

HR360 Note: The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose.

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