Numerous state and federal statutes and regulations require employers to maintain specific employee records after an individual has left the company. Certain jurisdictions require employers to provide a separation document to terminated employees.
It's possible former employees may request a job reference when applying for a new position elsewhere. If you provide such references, proper records can help determine who is most suitable to handle that request.
Employers must comply with all applicable recordkeeping requirements. Some local and state jurisdictions may have recordkeeping requirements that vary from federal regulations, so it's imperative that you become aware of such requirements in the location(s) in which you do business.
Here's a brief overview of a few of the federal recordkeeping requirements you need to adhere to:
Equal Employment Opportunity Commission (EEOC)
According to EEOC regulations, employers must retain all personnel or employment records for one year. If a charge has been filed against the company, records must be retained until the final disposition of the charge or any lawsuit based on the charge.
Age Discrimination in Employment Act (ADEA) and Fair Labor Standards Act (FLSA)
To comply with the ADEA, employers must maintain payroll records for three years from the date of termination. Certain employee benefits data must be kept for the full period the plan or system is in effect plus one year.
FLSA-required documentation including certain payroll records must be kept for three years from the date of termination.
Failure to maintain required employee records can leave businesses vulnerable to potentially costly fines and penalties by government agencies and adverse outcomes in court.
Recordkeeping best practices
Paychex senior HR generalist Marissa R. Cato offers these valuable recordkeeping tips:
- Use a central electronic system to house employee records (as opposed to maintaining paper files). Files can be easily separated to maintain confidentiality. "It's faster to search electronic files rather than flip through employee folders and sheets of paper," Cato notes. "Another benefit is the ease with which you can back up files and store them in the cloud or a remote location. This prevents data from being lost in a disaster or extreme weather event." Also, a central system takes up far less physical space than filing cabinets with paper.
- One important exception to the consideration above is that certain types of records can’t be combined together – whether in paper or electronic format. For example, a current or former employee’s medical information may not be saved in the same location as the employee’s personnel file. It is best practice for other documents to be retained separately. For example, the Form I-9 should be saved in a separate location.
- Employers must maintain strict confidentiality of all employee files (electronic and/or paper). "Only people with a legitimate business need to view the information should be able to access these files," Cato says.
In the unwelcome event of a lawsuit against your business, personnel files may help provide relevant documentation and evidence. Such files generally include performance evaluations, employee commendations, notifications of a raise in salary, records of any disciplinary actions taken during the employee's tenure, etc.
It may seem burdensome to maintain employee records after a person has left your business. But proper retention of employee records is required in many jurisdictions.