Companies require many records, and the Human Resources function is no stranger to records, record retention, confidentiality, and so on. Some applicable employment laws have recordkeeping mandates. Others do not, but have rules if the company creates certain records.

Records are involved before the first employee is hired, all the way through termination.

The importance of recordkeeping is demonstrated in the following stories:

• A job applicant, an African American woman, sues an employer for discrimination for failure to hire her. Company records of the interview show she was not as qualified as the applicant who was chosen but who declined the position (a Caucasian male), nor the applicant who was eventually hired (a Caucasian woman). Who wins? The employer does.
• A 59-year-old former employee sues the company for illegally terminating the employee because of age. Company documentation says it was because the employee lacked the necessary computer skills in working with spreadsheets, despite repeated training. Who wins? The employer does.

These are taken from actual court cases where the employer prevailed due to sufficient documentation. Not only should employers document the hiring and the termination process, but everything in between.

• A company should document its hiring process in case it needs to justify hiring decisions.

Good hiring documentation starts with a job description of the position. A job description should accurately reflect the skills and abilities necessary to successfully fill the position. This documentation is crucial to the hiring process. It will help screen out unqualified applicants and justify hiring decisions.

After an employee is on board, it is important to document training records, changes in skills required by the job, additional skills that are acquired, further education, changes in job duties, transfers, promotions, demotions, and so on. Documentation of training records can help an employer determine when someone is qualified — and when the employee is not. Documentation also serves to justify the reasons for pay differentials.

When an employer is sued, courts are reluctant to second-guess the processes the employer used in making its employment decisions. Even poor business decisions are generally left to stand if the decisions are not illegal. Documentation may be the thing that saves a company.

• Employers should create a written policy for maintaining employee records.

Creating a written policy for managing employee records is essential. The goals set should be straight-forward and simple. The system should encompass employment history, medical data, confidential information, payroll records, I-9 forms, and protected status information.

Employee files should be centrally located and appropriately secured. Additionally, employers should develop criteria to evaluate requests to view records, using the “need to know” standard. It’s important to review state laws on file access and record retention.

Most common-sense suggestions and tips are not mandatory; rather, they provide guidance to assist employers in accurately completing and maintaining employee records.

• A company should document employee-related activities as needed to prevent liability in court cases.

Employers should document employee-related activities as needed. Employee records should be objective and contain verifiable facts. In court cases, the burden of proof lies with the employer. The side with the best and most accurate documentation usually tips the scale in civil court cases, barring other circumstances.

Poor procedures for employment documentation can come with significant costs, including liability in legal proceedings.

Essential records must be maintained if the actual need exists. These include records legally required for workers’ compensation, insurance audits, and government inspections. Keeping records such as policy statements, training for management and employees, safety and health meetings, information distributed to employees, and medical arrangements is encouraged, and in some cases, required by federal or state agencies.

• Employee records should be easy to read and understand.

Employee records should be legible. If making handwritten notes, remember that the person making the notes may not be the same person who reads the notes several years later. Ensure that all records and notations are easy to read and understand.

Be sure the information in the records is not burdened with acronyms or jargon that can lead to confusion or are generally not useful.

Avoid fonts that are too small to read or are otherwise overly complicated and fancy. Margins and paragraph size and spacing should also lend themselves to easy reading. Shorter paragraphs are easier to digest than longer ones.

Headers can also help to break up longer content into smaller, easier to understand bits of information.

• A company should maintain complete, up to date employee records.

Employee records need to be complete and up to date. Changes in processes, procedures, equipment, materials, and personnel should be reflected in pertinent records as these changes occur. Additionally, employee training, medical examinations, and information required to be provided as a condition of employment should be noted in employee personnel files as soon as possible.

Original information should never be removed from a file. Records may be lost or misplaced, or simply never returned to the master file. To prevent lost records, establish a procedure for tracking information removed from a file.

• A company may keep employee records in many acceptable forms.

Most employee records may be kept either on paper, microfiche, magnetic tape, or electronically. If the relevant information is always available during working hours and is retrievable on demand, these are usually acceptable forms of records storage.

Keeping a duplicate hard copy of employee records in a secure location for easy access in case electronic access is impaired is usually advisable. It’s a good idea to shred all out-of-date personnel file records twice — ribbon and crosshatch.

• Federal law requires employers to retain some employee/personnel files for a set period of time.

Employee/personnel files are a depository of many different documents, each with specific information, required by certain laws, and with different retention periods. The personnel file is the place where many records are customarily kept.

To see what should be in an employee file (and what should not), refer to the following table. The list is not all inclusive, but represents some of the more common documents required by federal laws. The retention periods listed are the minimum. Many employers retain documents for longer periods.

• Federal law requires employers to retain certain employee records.

The table below provides an overview of the major federal human resources (HR)-related recordkeeping requirements. States may also require records, posting, and reporting beyond the information presented here, such as unemployment or workers’ compensation information. The table provides a quick reference on whether:

• Records are required,
• A poster or notice is required, and
• Forms, reporting, or a notice to employees is required.

Note: The quick reference table is applicable in most circumstances. However, certain factual scenarios may or may not require records to be kept. Likewise, certain posting and notice requirements depend on specific factual situations. For specific questions or circumstances, please consult each act for guidance.

• Employers should determine which documents to include in personnel files, and which to keep separate and confidential.

Employee personnel files need to be organized in a manner that allows for quick access. The information also needs to be as complete as possible. These files may be the source of a company’s defense if an employee ever decided to lodge a complaint with a government agency, or file a suit against the employer.

If the information is not accessible, or is not complete, an agency representative may see this as the employer’s noncompliance with a law, or a judge may see this as a lack of evidence of fair employee treatment.

Human resources (HR) professionals retain several documents in a personnel file. In addition, there is some information that organizations may want to think twice about retaining in the same file.

Personnel files should contain information that serves as a legal basis for employment-related decisions such as hiring, promotion, pay, termination, demotion, or training opportunities. This could consist of applications, resumes, performance evaluations, training session rosters or certificates, job descriptions, or documents containing disciplinary information.

HR professionals should organize the files such that some information is not included in the general employee files, but kept separate and confidential.

Keep the following separate:

Equal employment opportunity records — Employment decisions should not be based on protected classes such as sex, race, age, religion, national origin, color, or veteran’s status. Any documents that have information on protected status, whether it’s immigration forms, notes taken during interviewing, or medical leave information, should be kept separate.

Medical information — Employment decisions should not be made based on disability status; in addition, there may include medical privacy issues. Documents that include medical information may be health care benefit claims, the results of pre-employment or safety-related medical tests, or the results of drug tests.

Garnishment information — Employment decisions should not be made based on garnishment orders. Court-ordered garnishment information should be kept separate.

I-9 forms — If the DOL happened to be looking at a company’s employee files, and the I-9s are included in those files, the DOL could review the I-9s along with everything else in the file. With this in mind, an employer may want to keep immigration information separate.

• Employers should keep certain employee files confidential.

Not everyone should be allowed access to any type of employee file. Only those persons who have a need to know about the information contained in the files should have access.

In addition, those who make such decisions on who is hired, promoted, demoted, or terminated, should not have access to documents that reveal protected status. This may include managers and supervisors who may be involved in such employment decisions.

Under the federal Title VII of the Civil Rights Act, protected status includes gender, national origin, age, disability, race/color, religion, sexual orientation, gender identity, and genetic information. States may also add to this to include hair styles, marital status, ancestry, military status, use or nonuse of a lawful product off the employer’s premises during nonworking hours, marijuana use, and vaccine status.

• Employees have the right to access and review certain personnel file records and many states provide greater rights.

Employees have the right to access occupational exposure records under the federal Occupational Safety and Health Act.

Many states have laws that provide employees with a right to access and review their personnel files. The laws and their provisions vary from state to state, so human resources (HR) professionals need to be aware of the provisions in applicable states.

Typically, these laws allow that an HR representative or a supervisor be present when an employee accesses a personnel file. This is to be sure the integrity of the file and its contents remain intact. If the employee disagrees with something contained in the file, the employee is free to lodge a complaint, which should also be filed.

Some state laws allow employees to obtain copies of the documents in personnel files. If this is the case, an employer may want to be the one to make the copy and provide it to the employee. Some information sharing may violate privacy laws, so an employer may not want to include documents such as references or those relating to criminal investigations in the file.

• The FLSA requires covered employers to keep certain records for each non-exempt worker.
• Though beneficial, the records are not required for exempt workers.

Every covered employer must keep certain records for each non-exempt worker. The Fair Labor Standards Act (FLSA) requires no particular form, but does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned.

The following is a listing of the basic records:

• Employee’s full name and social security number;
• Address, including zip code;
• Birth date, if younger than 19;
• Sex and occupation;
• Time and day of week when employee’s workweek begins;
• Hours worked each day;
• Total hours worked each workweek;
• Basis on which employee’s wages are paid (e.g., “$9 an hour,” “$500 a week,” “piecework”);
• Regular hourly pay rate;
• Total daily or weekly straight-time earnings;
• Total overtime earnings for the workweek;
• All additions to or deductions from the employee’s wages;
• Total wages paid each pay period; and
• Date of payment and the pay period covered by the payment.

Employers need not keep such records for exempt employees. It may be beneficial, however, to do so, since such records are evidence of wages and hours, and can be called into question should a suit be brought alleging inappropriate pay or scheduling activities.

Some companies require all employees, exempt and non-exempt to use the same type of forms for recording hours and wages. Others have separate forms for exempt employees. One such form is commonly referred to as an exception report. This report indicates exempt employees’ normal working hours and is provided to such employees every pay period. If the employees have deviated from the indicated schedule, they are given the opportunity to make changes on the form to reflect the deviations. The form is signed whether changes were made or not.

• Employers are required to keep employment tax records of for at least four years.

Wages subject to federal employment taxes include all pay given to an employee for services performed. The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. It does not matter how the payments are measured or made. Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes.

To know how much income tax to withhold from employees’ wages, the employer should have a Form W-4, Employee’s Withholding Allowance Certificate, on file for each employee.

The Internal Revenue Service (IRS) requires that employers keep all records of employment taxes for at least four years. These should be available for IRS review.

Records should include:

• Employer identification number (EIN);
• Amounts and dates of all wage, annuity, and pension payments;
• Amounts of tips reported;
• Records of allocated tips;
• The fair market value of in-kind wages paid;
• Names, addresses, social security numbers, and occupations of employees and recipients;
• Any employee copies of Forms W-2 and W-2c that were returned as undeliverable;
• Dates of employment;
• Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments the employer or third-party payers made to the employees;
• Copies of employees’ and recipients’ income tax withholding allowance certificates (Forms W-4, W-4P, W-4S, and W-4V);
• Dates and amounts of tax deposits that the employer made and acknowledgment numbers for deposits made by Electronic Federal Tax Payment System (EFTPS);
• Copies of returns filed, including Form 941TeleFile Tax Records and confirmation numbers; and
• Records of fringe benefits provided, including substantiation.

• Employers should follow the basic recordkeeping requirements for federal tax and wage reporting compliance among other mandates.

Below are the basic requirements for federal tax and wage reporting compliance:

• Determine employee status, verify work eligibility by filing Form I-9.
• File Form 941 quarterly, and Form 940 annually. Send in Forms W-4 each quarter with Form 941 when the employee claims more than 10 withholding allowances, or exemption from withholding, and the employee’s wages would normally be more than $200 per week.
• Other forms may also be required (e.g., Form 943 for agricultural labor).
• File Form(s) W-2 (Wage and Tax Statement).
• File Form(s) W-3 (Transmittal of Wage and Tax Statement).
• File Form 945 (Annual Return of Withheld Federal Income Tax).
• File Form 1096 (Annual Summary and Transmittal of U.S. Information Returns).
• 1099 Forms — For certain types of income, a Form 1099 must be used with the federal tax return. Employers will not usually attach a 1099 series form to the return, except when receiving a Form 1099-R that shows income tax withheld. Keep all other 1099s with tax records. There are numerous 1099s.
• File Form 8027 (Employer’s Annual Informational Return of Tip Income and Allocated Tips).
• Check for required information returns and file those that apply to the company.
• Complete Form W-5 (Earned Income Credit Advance Payment Certificate). This form is retained by the employer.
• Determine business tax and wage reporting records to be kept, determine period to be kept, and maintain records.

States may also have additional employer reporting requirements.