Employee record retention and destruction issues

To keep or not to keep, that is the question

by Larry Morgan, MAIR, SPHR, GPHR
June/July 2013

Content remains current as of July 2013. 

Employers should know how long to keep or destroy employee files and documents. Each state and federal agency has a different set of requirements, often covering the same documents so it’s challenging for you to know what to keep and for how long.

Establish a policy

Establish a clear policy on record retention and destruction including schedule, file location, methods of destruction and a records administrator. Consider appointing a data steward charged with oversight, compliance and access determination as well as serving as a resource to handle questions and provide guidance.

When updating record retention strategies, companies should carefully consider the requirements for digital evidence in court to ensure that their electronic files will be admissible in discovery or litigation cases. The Federal Rules of Evidence require a digital time stamp and digital signature to prove the authenticity and integrity of electronic files presented in court.

If your organization uses social media to promote employee information and benefit changes, consider keeping these records. Preserve social media pages with the ability to re-play as if they were live with video, links, Flash and other features. Screenshots are generally not acceptable in regulatory situations. You must be able to prove the exact content of your social media pages from any given date.

Guidelines

Follow state and federal laws regarding employee access to files including review and copies of files. As part of your record retention policy, define what records should be kept and who has access, providing copies and retention length.

For each employee, maintain a separate file for the following:

  • Personnel files — Application and resume, interview notes, reference checks, W-4, training, wage data, performance reviews, disciplinary action, dates of hire, promotion, termination, wage garnishments, etc.
  • Benefit and health-related information — Health care benefits, workers compensation files, Family Medical Leave Act (FMLA), doctor’s notes, health care claims data, Health Insurance Portability and Accountability Act (HIPAA) protected information, flexible spending account information, etc. Only HR staff and few individuals should have access to these files. Keep for at least three years after the employee leaves the organization. Workers compensation is generally kept on file for the life of the employee or former employee.
  • I-9 forms — Keep I-9 forms separate and in a locked file area. I-9s contain date of birth, social security numbers and other identity information requiring additional safeguards. In addition, in the event of an audit, the I-9s must be produced within 24 hours. Update files as needed for name changes.
  • Investigative files — Investigative notes for issues such as theft and sexual harassment are not considered part of the official personnel file and access should be limited to key HR staff .
  • Supervisor working files — Supervisors often keep files on current employees regarding performance issues. Supervisors should give these notes and files to HR for inclusion in the official personnel file or destruction when the employee transfers or leaves.

Employers should know how long to keep or destroy employee files and documents. Each state and federal agency has a different set of requirements, often covering the same documents so it’s challenging for you to know what to keep and for how long.

Federal vs. State

Federal guidelines may conflict with state retention guidelines. In this case, follow the most conservative. Different industries may also have separate requirements (e.g. medical records or hazardous waste disposal).

The Lilly Ledbetter Fair Pay Act changed how employers treat retention of compensation information. Under the Act, every paycheck may constitute a new claim of discrimination, thereby extending the potential time period for EEOC claims. As a result, employers are documenting and retaining pay decisions including hiring offers and merit increase decisions, to justify actions against future claims of discrimination.

For employers who wish to adopt a voluntary record destruction program, some general guidelines are as follows:

  • Records relating to employee benefits and benefit determinations — keep for at least six years beyond final payment under the particular benefit program
  • Any materials relating to possible discrimination claims, including performance reviews and disciplinary comments — keep for a minimum of three years
  • Contractual documents — keep for at least two years following the final termination date of the contract

Paper or digital?

Electronic records are the same as paper records in terms of retention policies. Many employers use electronic imaging to store and retrieve electronic records. This involves a higher initial cost with labor and imaging services but saves on storage fees, protects against loss and damage, and allows for faster recovery and sharing of information.

Record access

Determine which records are public and available to the community, shareholders, the media and others. Which records are private with limited access to internal employees, current or prospective supervisors, and which are confidential to only limited staff.

Record destruction

Employers should regularly schedule destructions of documents once they exceed the approved time limit. For paper destruction, use an outside agency with an approved record destruction program including shredding of confidential documents. For digital records, erase and format hard drives software programs under the Department of Defense established protocol known as US standard DOD_5220.22-M.

Specific guidance under Federal Law (partial list)

Law Records/reports Time period
Age Discrimination Employment Act Payroll, applications, promotion and demotion records, transfer, layoff, recall, etc. Three years for payroll, one year for applicants; if charged or lawsuit filed, wait until final disposition
Americans with Disabilities Act Applications, requests for reasonable accommodation One year from making the record or taking the personnel action, if charged or lawsuit filed, wait for final disposition
Civil Rights Act (Title VII) Applications and other personnel records including promotions, transfers, demotions, layoffs, temporary and seasonal employees. Annual EEO-1 report for federal contractors with 50 or more employees and contracts of $50,000 and nongovernment contractors with 100 or more employees. One year from making the record or taking the personnel action; if charged or lawsuit filed, wait for final disposition
COBRA Proof of initial notice and written notice to employees and their dependents to continue group health plan coverage under certain conditions. Keep three years following event
ERISA Summary plan descriptions, annual reports, notice or reportable events such as plan amendments, plan terminations Minimum of six years, records used to determine employee benefits must be retained as long as they are relevant
Equal Pay Act Payroll records, timecards, wage rates, additions to/deductions from paychecks, etc. Three years
Fair and Accurate Credit Transactions (FACT) Act Consumer credit reports Employers must shred documents with information derived from credit reports
Fair Labor Standards Act (FLSA) Payroll or other records containing employee name, home address, date of birth, gender, occupation, rate of pay, time records, defined pay period, wages for each employee per pay period, deductions to or additions to paycheck, date of each payment and period covered. At least three years
Family and Medical Leave Act (FMLA) Records relating to basic employee data, dates of leave taken (for intermittent leave, hours of leave taken), copies of employee notices Three years
FICA, FUTA, Federal Withholding Records with employee name, compensation and tax information Four years after date tax is due paid
I-9 Completed INS Form I-9 signed by employee and employer Three years after date of hire or one year after date of termination, whichever is later
OSHA Log of occupational injuries and illness, annual summary of injuries and illness. Five years
  Medical records / records of employee exposure to toxic substances by employees Employee’s job tenure plus 30 years
Rehabilitation Act of 1973 applies to federal contractors Personnel/employment records, results of physical exams, records regarding hiring, assignment, promotion, layoff, termination, compensation and selection for training. Two years
  Disability complaints Kept until final disposition
  Affirmative action plans Updated annually, no requirement to retain expired plans
Uniform Guidelines on Employee Selection Procedures Records of number of persons hired, promoted, terminated by gender, race and national origin. Records include applications, tests, and other selection results for hiring, promotion, transfer, training and termination. Where adverse impact is found, records must be kept for two years.

Resources

Larry Morgan, SPHR, GPHR, MAIR, is the president of Orion HR Group. In addition, he is also the expert behind the MNCPA HR Hotline. He can be contacted at larry.morgan@orionhr.com.


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