Record Retention With Intention: Employer Records That Hold Up In Court

In the world of labor and employment, recordkeeping is not the most glamorous topic, but it is one of the strongest tools employers wield to manage risk. Proper documentation supports nearly every employment decision an employer makes such as hiring, compensation, performance management, and termination. Just as importantly, proper recordkeeping helps employers build a strong defense in the event of legal challenges.

When do employers need to keep records?

While employers in the United States generally do not need to indefinitely preserve business records, employers are under a duty to preserve relevant information to comply with regulatory retention requirements and when they reasonably anticipate a lawsuit or an investigation. Instances where this may arise include when an employer identifies a potential claim or receives a complaint, subpoena, or formal order.

What records are employers required to maintain?

• Equal Employment Opportunity Commission (EEOC) regulations require employers to keep all personnel or employment records for one year. If an employee is involuntarily terminated, his/her personnel records must be retained for one year from the date of termination;
• Immigration law mandates Form I-9s and copies of documentation must be maintained for three years after date of hire or one year after termination, whichever is longer;
• Under the Age Discrimination in Employment Act (ADEA), employers must keep all payroll records for three years;
• Employers must keep on file any employee benefit plan subject to ERISA (including plans regarding health and dental insurance, 401K, long term disability, and Forms 5500) for six years from when the record was required to be disclosed and any written seniority or merit system for the full period the plan or system is in effect and for at least one year after its termination; and
• The Department of Labor (DOL) mandates employers maintain records consistent with Fair Labor Standards Act (FLSA). While the records may be maintained in any form whether electronically or a paper copy, the law does mandate the records be maintained for at least three years for payroll records, collective bargaining agreements, sales and purchase records. Records on which wage computations are based should be retained for two years, i.e., timecards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages.

Proper record retention is not only a legal obligation; it is a company’s first line of defense when litigation arises. Failure to properly maintain records could lead to financial repercussions and potential spoliation jury instructions. Intentional retention of records should be a part of every employer’s best practices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.