Recordkeeping

Scope

Use a system that encompasses the employee’s employment history, medical data and other confidential information, payroll records, I-9 forms, and protected status information.

Regulatory citations

• 41 CFR 60-2.11 through 60-2.17— Affirmative action programs.

Key definitions

• None

Summary of requirements

Policy. It is essential to create a written policy for managing employee records. The goals set in a recordkeeping policy should be straight-forward and simple. It could include:

• Which records are kept,
• Where records are kept,
• What formats are used,
• How long records are kept,
• Who has access,
• When records are reviewed,
• How no-longer-needed records are destroyed, and
• The party responsible for the record.

When changes occur in the workplace that could affect the policy, it should be reviewed. A company might also benefit from having a regular review schedule of its recordkeeping practices. Additionally, develop criteria to evaluate requests to view records, using the “need to know” standard. Don’t forget to review state-specific laws on file access and records retention.

The following common-sense suggestions are not mandatory; rather, they provide guidance to assist the employer in accurately completing and maintaining employee records.

Document activities. Document all employment-related activities. Employee records should be objective and contain verifiable facts. In civil court cases, the side with the best and most applicable documentation is usually the most successful.

Keeping records of these activities, such as policy statements, training sessions for management and employees, safety and health meetings, information distributed to employees, and medical arrangements is greatly encouraged and, in some instances, required by government agencies, both federal and state.

Easy to read and understand. Records should be legible. If handwritten notes are made, it is important to remember that the person making the notes might not be the same person who reads them several years later. Ensure that all records and notations are easy to read and understand.

Up-to-date. Records need to be 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 must be noted in employee personal files as soon as possible.

Complete. Records need to be complete. Original information should never be removed from a file. This practice often results in incomplete files since records may be lost or misplaced by end users or simply never returned to the master file. To prevent lost records, establish a procedure that must be followed for obtaining file information.

Formats. Most records may be kept on paper, microfiche, magnetic tape, or electronically. As long as the relevant information is always available during working hours, applicable information is kept secure, and information is retrievable on demand, these are acceptable forms of records storage.

It is advisable to keep a duplicate hard copy of employee records in a secure location for easy access in case electronic access is impaired. Shred all out-of-date personnel file records twice — ribbon and cross-hatch.

Fair Labor Standards Act (FLSA). Every employer covered by the Fair Labor Standards Act (FLSA) must keep certain records for each covered, nonexempt worker. There is no required form for the records, but the records must include accurate information about the employee and data about the hours worked and the wages earned. The following is a listing of the basic records that an employer must maintain:

• 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 and total hours worked each workweek.
• Basis on which employee’s wages are paid;
• 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.

Employee Polygraph Protection Act (EPPA). Private-sector employers who conduct polygraph tests as part of an ongoing investigation must maintain, for three years, a copy of a signed statement that is provided to the examinee before the test. The statement must:

• Identify the specific economic loss or injury to the business of the employer,
• Indicate that the employee had access to the property that is the subject of the investigation, and
• Describe the basis of the employer’s reasonable suspicion that the employee was involved in the incident or activity under investigation.

It would be a best practice for all private-sector employers to retain records involving the rights of the examinees. These records include:

• Written evidence by a physician that the examinee has a condition or is undergoing treatment that might cause abnormal responses;
• A written notice of the date, time, and location of the test, and the examinee’s right to legal counsel (or consultation with an employee representative) before each phase of the test;
• A written description of the nature of the tests and of the instruments involved;
• A written notice as to whether the testing area contains a two-way mirror, a camera, or any other recording or observation device and that the employer or the examinee may (with mutual knowledge) make a recording of the test;
• A written notice (signed by the examinee) explaining the Act’s limitations and the employer’s and the examinee’s legal rights. The notice must also inform the examinee that there is no requirement to take the test as a condition of employment and that any statement made during the test may be supporting evidence for an adverse employment action;
• The questions asked during the test along with the corresponding charted responses; and
• A copy of the examiner’s written opinions and conclusions.

The examiner must keep all opinions, reports, charts, questions asked during the test, lists, and other records for at least three years following the test.

Employer reports: Form LM-10. Employers must file annual reports to the Department of Labor (DOL) disclosing certain specified financial dealings with their employees, unions, union agents, and labor relations consultants. Employer Report, Form LM-10, must be filed by employers to disclose:

• Payments or other financial arrangements (other than those permitted under section 302(c) of the Labor Management Relations Act, 1947, and payments and loans by banks and similar institutions) which they made to any union, its officers, or its employees;
• Payments to any of their employees for the purpose of causing them to persuade other employees with respect to their bargaining and representation rights, unless the other employees are told about these payments before or at the same time they are made;
• Payments for the purpose of interfering with employees in the exercise of their bargaining and representation rights, or obtaining information on employee or union activities in connection with labor disputes involving their company; and
• Arrangements (and payments made under these arrangements) with a labor relations consultant or any other person for the purpose of persuading employees with respect to their bargaining and representation rights, or for obtaining information concerning employee activities in a labor dispute involving their company.

Such reports are quite rare. The employer should consult a lawyer if it believes that such a report needs to be filed.

Family Medical Leave Act (FMLA). Employers covered by the FMLA are required to make, keep, and preserve certain records. They are not required, however, to submit any records to the DOL unless specifically requested to do so by a DOL official.

No particular order or form of records is required. Employers must, however, keep the records for no less than three years and make them available for inspection, copying, and transcription by DOL representatives upon request.

Covered employers who have eligible employees must maintain records that disclose the following:

• Basic payroll and identifying employee data (this might already be captured under the Fair Labor Standards Act);
• Dates FMLA leave is taken by FMLA-eligible employees (leave must be designated in records as FMLA leave), including the hours of the leave, if FMLA leave is taken in increments of less than one full day;
• Copies of employee notices of leave provided to the employer under the FMLA, if in writing, and copies of all eligibility notices given to employees as required under the FMLA (Copies may be maintained in employee personnel files)
• Any documents (including written and electronic records) describing employee benefits or employer policies and practices regarding the taking of paid and unpaid leave;
• Premium payments of employee benefits; and
• Records of any dispute between the employer and an eligible employee regarding designation of leave as FMLA leave, including any written statement from the employer or employee of the reasons for designation and for the disagreement.

Records and documents relating to medical certifications, recertifications, or medical histories of employees or employees’ family members created for purposes of the FMLA must be maintained as confidential medical records in separate files/records from the usual personnel file.

Additional recordkeeping requirements apply to employers of airline flight crew employees.

Internal Revenue Service (IRS). 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 them;
• 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 the electronic federal tax payment system (EFTPS);
• Copies of returns filed; and
• Records of fringe benefits provided, including substantiation.

Unemployment. While unemployment regulations vary from state to state, some recordkeeping requirements are common to all programs. To verify that payroll was correctly reported for unemployment insurance (UI) purposes, an auditor may look at a variety of documents and records. Payments to workers are made differently and through different accounts from employer to employer. These payments may be considered payroll for UI purposes. Thus, the auditor may ask to look at any records that may contain payroll information or payments for services.

Affirmative action. Certain federal contractors must maintain and make available to the OFCCP, upon request, documentation of their compliance with 41 CFR sections 60-2.11 through 60-2.17. This documentation must include:

• Organizational profile,
• Job group analysis,
• Placement of incumbents in job groups,
• Determining availability,
• Comparing incumbency to availability,
• Placement goals, and
• Additional required elements of affirmative action programs.

In addition, during a compliance review, a compliance officer examining the contractor’s affirmative action program may ask to see personnel, payroll, and other employment records.

I-9 retention. I-9 forms are not filed with the U.S. government. Employers are to have an I-9 on file for all current employees. They must maintain I-9 records for three years after the date of hire or one year after the date the employee’s employment is terminated, whichever is later, as well as terminated employees whose records remain within the retention period. The I-9s should be in a separate file for ease of auditing.

Social Security Administration (SSA). Along with other personal information, the employer must keep a record of the employee’s SSA number, and the amount and date of the employee’s tax contribution for four years from the tax due date, or payment of tax, whichever is later.

Fair Credit Reporting Act. The Fair Credit Reporting Act (15 U.S.C. 1681 et seq.) regulates the handling and disposal of paper, electronic, or other forms of consumer reports and records, consumer consent forms, and consumer complaints. The regulations require covered entities to take reasonable measures to protect against unauthorized access to, or use of, the information in connection with its disposal.

ERISA. The Employee Retirement Income Security Act of 1976 requires employers who have employee health or welfare plans to file a Form 5500 annual report and retain this information for at least six years after the form is filed. The Form 5500 is filed with the Department of Labor’s Employee Benefits Security Administration. Employers must also maintain all records required to document the accuracy of the information required by the Form 5500. The Form 5500 filed by plan administrators are due by the last day of the 7th month after the end of the plan year.

HIPAA. Like ERISA, the Health Insurance Portability and Accountability Act has records that need to be retained, such as policies, contracts, authorizations, disclosures, notices, etc. Also, like ERISA, the retention period is at least six years.

ACA. Employers subject to the pay-or-play provisions of the Affordable Care Act (ACA) must provide information to the IRS about the type of health coverage offered to their full-time employees. Such employers must also provide this information to employees. They are to use Form 1095-C Employer-Provided Health Insurance Offer and Coverage to report the information for each full-time employee and, if self-insured, for part-time employees enrolled in coverage as well. They are to use Form 1094-C to transmit the 1095-C returns to the IRS. The IRS will then use these forms to determine whether the employer owes a penalty under the pay-or-play provisions, and whether employees are eligible for premium tax credits.

The ACA requires employers that sponsor self-insured health plans that provide individuals with “minimum essential coverage” to report to the IRS information concerning the type and period of coverage offered. The IRS will use this to help enforce the ACA’s individual mandate. Employers use Form 1095-B to report the information required under Section 6055, and Form 1094-B to transmit the 1095-B return to the IRS. Self-insured employers are to report the information required under both Sections 6055 and 6056 on a single combined Form 1095-C.

Applicable employers must file a Form 1095-C for each employee who was a full-time employee for any month of the calendar year. Such employers that provide health coverage through an employer-sponsored self-insured health plan must also complete Form 1095-C, Part III, for any individual (including any full-time employee, non-full-time employee, employee’s family members, and others) who enrolled in the self-insured health plan.

Failure to comply with the reporting requirements may result in penalties. The penalty for failure to file an information return or to provide a payee statement generally is $280 for each return for which such failure occurs.

State agencies. Various state agencies also impose their own retention requirements. These could include unemployment, workers’ compensation, or new hire reporting, for example.