Record retention is the most essential function of an effective human resources program. Before setting up shop, employers should know what records they should keep, how long they should keep them, and in what format the records should be kept. Adequate retention will likely safeguard the employer from future legal action and/or costly sanctions. The latest technology could help employers safeguard this sensitive data more efficiently.
What Records Should An Employer Retain?
Generally, there are four groups of employee records: personnel files, payroll files, medical files, and I-9 files. An employer should keep all four of these files for each employee.
First, personnel files may include applications and resumes, performance evaluations, attendance records, disciplinary records, handbook receipts, training certificates, and contact information. In contrast, an employee’s payroll files may contain a history of the employee’s compensation changes, relevant government forms, such as W-2s and W-4s, and any other information essential to payment.
An employee’s medical file should be kept in a separate and safe location. It may include doctors’ notes, drug test information, and other documentation related to an employee’s health. The medical file receives the highest degree of confidentiality, and may only be available to the employer’s Human Resources department, designated staff, and the employee. It is usually recommended that medical files be kept in secure locations (e.g. locked file cabinets or rooms, password protected storage, etc.).
Finally, I-9 Forms should be kept separately for easy access. I-9 Forms are used to verify the employee’s identity and legal authorization to work in the United States. Keeping the I-9 Form separate ensures that the employer will be able to comply with any federally mandated I-9 review. Please note that if subject to a review, the employer must make copies of the forms available on three days’ notice.
How Long Should Employers Retain These Records?
Both federal and state law mandate that employers keep certain records for a specific amount of time. Although it may be challenging, because each law has a different set of requirements often for the same records, an employer may be subject to very expensive fines and legal fees if it does not comply.
Fair Labor Standards Act: Under the FLSA, personnel records, billing records, and records for deductions from wages paid must be kept for two years. Payroll records, certificates, agreements, plans, and sale and purchase records must be kept for three years.
Civil Rights Act of 1064/Title VII/ADEA/ADA: Under the Civil Rights Act, Title VII, and the ADA, Employers with at least 15 employees must retain personnel records related to hire, promotions, transfers, demotions, training, and terminations for one year. The ADEA requires the retention of the same records for 1 year for employers with 20 or more employees.
Family Medical Leave Act: The FMLA requires the retention of certain records related to payroll and demographic information as well as any information related to an employee’s leave of absence for three years.
Occupational Safety and Health Act: OSHA requires that records of job-related injuries be kept for five years, and records related to medical exams and toxic substance and blood-borne pathogen exposure to be kept for 30 years.
The statute of limitations for filing an unlawful discrimination claim in Ohio under R.C. 4112 is six years. Accordingly, it is generally a best practice for Ohio employers to retain all records related to an employee’s termination for at least six years.
Can Technology Help?
It is now becoming more commonplace for employers to digitize employee records. While maintaining these records in electronic format has obvious benefits, including better accessibility and storage efficiency, employers must be mindful so as to avoid legal pitfalls under federal and state law. Retention requirements are generally satisfied if the electronic media has reasonable controls, can maintain the records in a well-organized manner, can convert into paper copies, and can allow employers to effectively comply with reporting requirements.
In addition, Blockchain is now set to become the next trend for employee record retention. Blockchain is an encrypted digital ledger of public records organized into groups of data called “blocks” and distributed over networks. Only those connected to a block may add information, and the information may not be deleted or changed. These types of systems could make the concept of “self-sovereign identity,” the idea that employees may control data about themselves, a possible reality. For example, the network could allow potential employees to share verified data with employers, and at the same time, reduce the likelihood of third-party companies providing inaccurate data. Another emerging application of Blockchain is the ability to better safeguard medical records. Employee medical information may be added to a “block,” making it available to only those with permission to access the network. While there are current challenges to Blockchain in the employment context, many scholars believe it will make employer record retention much less complex and inexpensive.