There was a time when an employee’s personnel file was a physical paper file filled with tangible documents. Now, employers globally are streamlining their HR processes through the use of electronic systems enabling them to create, track, edit, and store all of the recruitment, talent, and health information of their employees. Many employers using an electronic record-keeping system have questions about whether their federal and state record retention requirements are being met, and more importantly, if and when they can destroy the original paper documents that have long since been scanned and stored electronically.
This Tip addresses some of these concerns and offers practical considerations for those employers embracing a virtual system of record.
What are an employer’s federal record retention requirements?
Several different federal laws require that an employer maintain records, for different purposes, and for different time periods. For example, under Title VII of the Civil Rights Act and the Americans with Disabilities Act, employers must maintain any personnel or employment record made by that employer including: requests for reasonable accommodation; application forms submitted by applicants; other records having to do with hiring, promotion, demotion, transfer, lay-off, or termination; rates of pay or others terms of compensation; and selection for training or apprenticeship, for a period of at least one year from the date the records were made, or from the date of the personnel action involved, whichever is later. Employers subject to the Equal Pay Act must maintain all records required to be kept by employers under the Fair Labor Standards Act (FLSA, part 516) for at least 3 years, and must maintain records pertaining to the following for a period of at least 2 years: payment of wages; wage rates; job evaluations; job descriptions; merit and seniority systems; collective bargaining agreements; other matters which describe any pay differentials between the sexes. Employers subject to the FLSA must maintain a significant amount of information with respect to each employee subject to the minimum wage and/or overtime provisions of the act for a period of 3 years, and employers subject to the Family and Medical Leave Act of 1993, as amended (FMLA), are required to make, keep and maintain records for a period of 3 years. For a full list of laws and records to be retained, WFN Comprehensive HR clients should visit the “Record Retention Requirements” survey available in their HR Encyclopedia. All other Comprehensive Services clients can obtain a copy of this survey from their Service Team.
What are an employer’s state record retention requirements?
An employer’s record retention requirements can vary substantially by state. Most states have laws requiring employers to retain the same basic categories of documents, such as those pertaining to wage and hour, discrimination, workers’ compensation and unemployment. However, some states have laws mandating that additional categories of documents be retained such as those pertaining to harassment training (Connecticut); child labor (Alabama); E-Verify, (Alabama, North Carolina); immigration (Arizona, Colorado); and polygraph examinations (Nevada). It is important for employers to be aware of, and understand, its state retention requirements in order to remain compliant. Employers should remember that, if a state does not maintain its own specific requirement the employer is generally required to abide by federal requirements. Again, Comprehensive HR clients can obtain state record retention requirements by accessing the “Record Retention Requirements” survey available in their HR Encyclopedia. All other Comprehensive Services clients can obtain a copy of this survey from their Service Team.
Can all information pertaining to one employee be kept in the same file, or do employers need to maintain certain information in separate files?
Every employer should maintain several separate files for each employee. At the very least, employers should maintain a “personnel” file, a “confidential medical or health information” file, an “EEO” file, and a “work eligibility” file. Any documents relating to an employee’s health or medical condition, including any leave of absence requests based on an employee’s injury or disability, should be maintained in a separate medical or health information file. Any information reflecting an employee’s voluntary self-identification of gender, ethnicity, or race, veteran’s status or as an individual with a disability (EEO or OFCCP information), should be kept in a separate file, and, as a best practice, these identifiers should not appear on any performance management documentation to which a decision-maker has access. Finally, a worker eligibility file should include the employee’s Form I-9, and any proof of identification and eligibility. It is also a best practice for employers to maintain a separate file for all payroll related information, one for benefits related information, and an investigation file, should the employee initiate or be the subject of any complaint requiring investigation. An employee’s personnel file will contain almost all other information relating to the employee and their position with the Company including their job application; other records having to do with hiring, promotion, demotion, transfer, lay-off or termination; rates of pay or other terms of compensation; training records; their resume, any appropriate job descriptions; and employment policies provided to the employee and the employee’s acknowledgment of those policies.
Should employers maintain document retention and destruction policies?
As part of a healthy paperless HR and document retention system, employers should consider maintaining a written policy detailing their record retention obligations and document destruction procedure. For example, a policy may indicate that general HR records are to be maintained for a period of 1 year, and OSHA logs must be kept for a period of 5 years. As part of any policy, employers should stress that prior to the destruction or deletion of any documents, an HR Manager should be contacted. For purposes of an electronic recordkeeping system, the ability to delete documents should be given to a limited number of personnel to avoid any inadvertent destruction that might jeopardize an employer’s compliance.
What is an electronic storage system?
An electronic storage system can be an important part of employer’s document retention strategy. Generally, an electronic storage and maintenance systems allow employers to maintain compliance with document retention laws in a cost-effective manner. An electronic document storage system with user friendly functionality can also benefit employers who are, or may be subject to, regulatory agency audits. Not only are the records readily accessible but, because the documents can be easily segregated and maintained in appropriate folders, employers lessen the risk of handing over “the kitchen sink” to auditors. Because of the safety sensitive nature of the information contained in HR records, and because some cloud-based systems may be subject to breach, employers should utilize an electronic record keeping system that is secure.
If an employer stores documents on a cloud or any electronic system, can it destroy paper copies of those same documents?
Generally, an employer who stores documents on a cloud based system can destroy the paper copies of the documents that it has scanned and stored in that system, if it is their business practice to do so (which should be articulated in a policy), and so long as the employer can recreate a paper copy from the electronic form of the document. However, an employer who chooses to destroy its original paper documents and rely solely on an electronic system of record should consider the possibility that it might some day – or at an inopportune time (such as during a DOL audit) – lose access to those electronically stored documents, and it will not have any paper back up. For this reason, employers who have embraced the electronic system of record, often consider retaining a small paper file of critical originals should the circumstance arise that they are needed. Critical originals might be those documents containing original signatures of either the employee, employer, a physician, or someone else on documents that relate directly to the individuals employment (i.e. employment applications, employment agreements, doctors notes, etc.). Often original signatures play an important role in authenticating a document, and can assist an employer who is faced with a claim of discrimination or an EEOC investigation. Note: Employers should always consult with legal counsel to discuss the risks involved in document destruction, and what - if any - documents that employer should consider retaining in hard copy.