How Long Should I Retain Employee Records?

The accurate creation and careful maintenance of employee records can be crucial. Here are some things to keep in mind.

If your business has ever been sued for alleged violations of wage and hour laws, or if you’ve otherwise ever been a party to litigation involving discovery of any kind of employee records, then you know just how important it can be for most businesses to accurately create and maintain employee files.

In some circumstances, the kinds of records that should regularly be maintained in employee files can help employers establish or refute claims and/or defenses in the unfortunate event that they find themselves in a dispute with a state attorney general’s office, a federal regulator, or their current or former employees (or any combination of these parties). Such disputes can represent nightmare scenarios for the unprepared. If your business’s records retention practices and policies keep you awake at night, then read on.

Many readers are probably already aware that federal and state laws require employers to keep a variety of records on both current and former employees and furthermore, that these different recordkeeping requirements can apply for varying lengths of time. See U.S. Equal Employment Opportunity Comm’n, Record Keeping Requirements, https://www.eeoc.gov/employers/recordkeeping.cfm (last visited Jan. 1, 2019) (explaining some examples of federal recordkeeping requirements); see also, e.g., R.C. 4111.08, available at http://codes.ohio.gov/orc/4111.08v1 (Effective Date: July 1, 2000; April 4, 2007) (providing an example of an Ohio recordkeeping requirement).

Of course, depending on which statutes apply to the various records that an employer is required to keep, different recordkeeping requirements, including records retention periods, might apply. As a result, decisions on which records to keep, and how long to keep them, can frequently become sources of confusion. Employee recordkeeping requirements, and the potential consequences for failing to heed them, mean that effective and up-to-date records retention policies are a must for any business.

Wage and hour litigation is one of the most common circumstance wherein employee records are directly relevant to the parties’ claims and defenses. Thus, wage and hour recordkeeping requirements will be our main source of examples for this article, but we will try to include other examples as well. Keep in mind, however, that records contained in employee files can frequently be relevant in other situations such as, for example, where discrimination and/or wrongful termination are alleged, or where claims arise from a former employee’s alleged breach of a confidentiality, non-compete, or non-solicitation agreement.

The critical items to keep in mind when formulating a records retention policy are: which laws and regulations apply, the policy reasons given to justify the enactment of these laws and their underlying regulations, the identifiability of records to employees, and the formats in which records are generated and maintained.

Which laws apply?

Two federal statutes generally require employers to retain current and former employee records, including payroll records and biographical data. One statute is the Fair Labor Standards Act of 1938, 29 U.S.C. § 203, et seq. (“FLSA”). The FLSA provides, among other things, protections for workers’ rights to receive a minimum wage, as well as overtime pay for hours worked in excess of 40 hours in one workweek. The FLSA is administered by the United States Department of Labor (“DOL”).

The other federal statute is the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq. (“ADEA”). One of the main, overarching purposes of the ADEA is to protect workers over the age of 40 from discrimination in hiring, firing, and compensation decisions. The ADEA is administered by the United States Equal Employment Opportunity Commission (“EEOC”).

Both the FLSA and the ADEA generally require records of terminated employees to be maintained for at least three years following the date of termination. However, both statutes (in addition to other federal and/or state laws that may apply) might also permit or require different records retention periods for other portions of a former employee’s file. For example, the ADEA requires private employers to retain “all personnel and employment records” about former employees for one year after the employee’s departure. See U.S. Equal Employment Opportunity Comm’n, Summary of Selected Recordkeeping Obligations in 29 CFR Part 1602, https://www.eeoc.gov/employers/recordkeeping_obligations.cfm (last visited Jan. 1, 2019). Examples of “personnel and employment records” include (but are not limited to): “[R]equests for reasonable accommodation, application forms submitted by applicants, and records dealing with hiring, promotion, demotion, transfer, lay-off or termination, rates of pay, compensation, tenure, selection for training or apprenticeship, or other terms of employment.” Id.

Policy Justifications

The policy justification most frequently given for requiring employers to maintain accurate employee records is for the protection of employees’ rights, including rights to fair compensation. Records may also be used for a variety of other reasons, including to ensure that employers follow child labor laws and regulations, for example. Furthermore, employers should also be prepared to respond to records requests from employees.

Notably, in some jurisdictions an employer’s failure to keep accurate records may in some circumstances give rise to an independent cause of action—including class and/or collective actions. For example, the Ohio Constitution requires employers to “maintain a record of the name, address, occupation, pay rate, hours worked for each day worked and each amount paid an employee for a period of not less than three years following the last date the employee was employed.” Ohio Const. art. II, § 34a, available at https://www.legislature.ohio.gov/laws/ohio-constitution/section?const=2.34a (adopted Nov. 7, 2006). Ohio employers are required to provide these records to employees or their representatives upon request. See id.

Furthermore, employers can be sued by the attorney general, by an employee, or by a group of former employees “for any violation of this section [34a of the Ohio Constitution] or any law or regulation implementing its provisions within three years of the violation or of when the violation ceased if it was of a continuing nature, or within one year after notification to the employee of final disposition by the state of a complaint for the same violation, whichever is later.” Id.; see also, e.g., Clark v. Shop24 Global, LLC, No. 2:12-cv-00802, 2014 WL 60071, at *3, n.2 (S.D. Ohio, Jan. 7, 2014); Craig v. Bridges Bros. Trucking LLC, No. 2:12-cv-954, 2013 WL 4010316, at *4 (S.D. Ohio, Aug. 6, 2013). In other words, Ohio employers may be sued for a failure to respond to an employee’s records request, and/or for the failure to maintain accurate records.

Identifiability of Records

To be of any use, records obviously must be reasonably identifiable to the employees to whom they relate. In practice, this requires employers to track certain biographical data and ensure that it is all easily attributable to the relevant employees. The DOL presently requires all employers covered by the FLSA to keep certain records for all covered, nonexempt workers including, for example:

•             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 the week when the employee’s workweek begins, including the hours worked each day and the total hours worked each workweek;

•             bases on which the 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.

DOL, Recordkeeping & Reporting, https://www.dol.gov/general/topic/wages/wagesrecordkeeping (last visited Jan. 1, 2019); see also DOL, Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA), https://www.dol.gov/whd/regs/compliance/whdfs21.pdf (rev. Jul. 2008).

Format

While the DOL does not require records to be kept in any particular format, see id., employers should generally ensure that they have ready access to employee records, and they should also be mindful that current and former employees may have certain rights to request and/or view information contained in their employee files. Employers should also carefully consider keeping a redundant set of employee files backed-up in a central, secure location in order to mitigate any risk of tampering or theft of information maintained in employee files.

Should I contact an attorney?

If you have questions or concerns about state and/or federal recordkeeping requirements that may apply to your business, you should contact an attorney. If properly implemented, records retention policies may help reduce risks associated with wage and hour claims or other disputes. You should contact an attorney for additional information regarding this area of the law.

This article is for informational purposes only, and it is merely intended to provide a very general overview of a limited set of examples of some recordkeeping requirements that may apply to some employers. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney. If you have questions about your particular legal situation, you should contact an attorney.

Max Julian can be reached at mj@gertsburglaw.com or by phone at (440) 571-7541. Max and the attorneys of The Gertsburg Law Firm can help you avoid the pain of lawsuits with CoverMySix, a one-stop legal audit for your business led by award-winning litigators and in-house counsel. Visit covermysix.com to learn more about how to protect your business, and check out the new pricing for CoverMySix for Small Companies and Startups.

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  • Next up: How the BWC Calculates Your Premiums
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  • How the BWC Calculates Your Premiums

    As we approach the start of the 2019 policy year on July 1, it’s important to understand how the BWC calculates your premiums. The three driving factors in calculating premiums are your payroll, which the BWC uses to gauge your size; your industry/manual classification codes, which the BWC uses to gauge your exposure to risk; and your claims cost record/losses, which gives the BWC a snapshot of your specific experience.

    Industry groups identified by the BWC include Manufacturing, Construction, Transportation, Commercial, Service, High Risk Commercial/Service, Office/Clerical, Agriculture, Extraction and Utility. COSE does not have group programs for Agriculture, Extraction and Utility at this time. Manual classification codes, established by the National Council on Compensation Insurance (NCCI), are used to identify various jobs within each industry group. The BWC uses information from your application for coverage to assign manual codes, so it’s important that you review your manual codes and advise the BWC of any changes in operations or job functions.  The base rates assigned to each manual classification code are calculated by the actuarial department using industry and claims costs associated with each manual classification (exposure to risk).

    The Experience Modifier (EM) is calculated using your four-year experience payroll and experience claims  and then applied to the base rate to modify the rate based on a comparison of risks within an industry.  Participation in discount programs such as Group Experience Rating or One Claim Program could also impact the EM. BWC administrative fees and DWRF are then added to the Modified Rate, resulting in a Blended Rate. 

    Prior to the start of the policy year, the BWC will calculate your estimated annual premium using the last True Up payroll reported. This is usually done in late Spring for the policy year beginning on July 1st. This will be broken down by manual code.  It’s important to review the estimated premium to avoid significant over or under payments in premium. 

    At the end of each policy year, employers are required to report the actual payroll for the prior policy year in the True Up process.  The system will recalculate premium for the prior policy year based on the actual payroll and determine whether additional premium or credit is due.  This must be completed by Aug. 15. 

    Additional resources

    Download an overview of BWC premium rates.

    Download a one-pager explanation from the Ohio BWC on how it calculates insurance rates.


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  • Next up: How to Fire Someone and Not Get Sued
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  • How to Fire Someone and Not Get Sued

    You don’t want to have to think about terminating an employee. But if the time comes, be prepared with a solid policy and procedure that you can rely on to handle the situation with consistency and confidence.

    Cheryl Perez, founder and president of BIG HR, presented last month’s WebEd Series Webinar on a topic important to any business owner who employs at least one other person: How to Create and Implement an Effective and Easy Termination Policy and Procedure Without Getting a Lawsuit.

    Cheryl shared the following three secrets to terminating an employee without having it lead to a lawsuit.

    Secret No. 1: There are things you need to do before you terminate someone. And when you do those things, they’ll probably terminate themselves for you. You need to make sure there has been a Performance Improvement Plan identified and created, along with a specific deadline date. When people don’t meet these performance improvement requirements, they tend to then resign.

    Secret No. 2: You need to follow a real termination policy and process to keep things consistent and fair for all employees.

    Secret No. 3: Termination doesn’t end when that employee walks out the door. You need to make sure you have your post termination process squared up. Losing an employee, even if it was someone who wasn’t performing up to par, can impact your business for the next several months when you don’t have the proper off-boarding process in place.

    Ask yourself the following questions to see if you need further assistance in the area of employee termination:

    • Are you worried about termination impacting your business?
    • Are you concerned about retaliation?
    • Are you losing sleep because of an employee?
    • Do you have someone right now you feel like you need to get rid of but you don’t know if you can or how to go about doing it?
    • Is your business being held hostage by poor-performing employees?

    If you don’t even know where to start, let’s take a closer look at each of the secrets.

    Secret 1: It’s important that you have an established workplace code of conduct and that it’s updated in your employee manual. Address the actions and behaviors that if committed its grounds for immediate termination. An effective employee discipline and performance improvement process should be progressive. Once you have this in place and employees and management staff and HR team are trained on it, then once employees enter into this process they know they have begun the cycle that can end in their termination. Employees engaging in this process begin to address their core behaviors that are getting them in trouble. Also keep in mind that verbal counseling can be part of the process but can only get you so far—document, document, document!

    To recap, you must have:

    • Established workplace code of conduct
    • Established disciplinary policy and procedure
    • Documentation on steps taken
    • Well-trained employees

    Secret 2: It’s crucial to have a real termination process and procedure in place to keep things fair and consistent. The last thing you want is to take actions that lead to discrimination claims and unlawful termination claims. When everyone on your staff follows the same exact procedures and policies, then you have the confidence in knowing you are treating everyone the same.

    Be sure to exhaust all steps within your termination plan—and make sure one step is complete before moving on to the next step. If it doesn’t come down to actual termination of an employee, do it later in the day when a lot of employees have left in order to reduce the drama. Have a formal termination meeting where you request the presence of an HR person or other staff member to witness what unfolds, and again be sure to document.

    Secret 3: Post-termination action steps must be solid in order for the business to function properly following the termination. This is especially important for small business because there is less wiggle room.

    Take the following three steps to help make any transition quick and easy so you can get back to business.

    • Notify payroll and insurance providers
    • File paperwork and records
    • Retrieve all company materials and company access from the former employee

    The off-boarding process is critical. Make sure you have a final termination packet, which includes a checklist and exit interview so that you can get feedback and a pulse on where that employee’s mind is. Check for red flags.

    A good procedure will include:

    • A detailed process for both voluntary and involuntary termination: Addressing what happens when an employee passes away. What is different if the person resigns versus being fired?
    • Extensive documentation that was compiled along the way.
    • Next steps: employee final paycheck, health insurance, etc

    Be proactive instead of just reactive; take the time to focus on putting together the right policy and procedure in place proactively and the situation will help itself. Apply it in a fair and consistent manner, and make sure your procedure applies with state laws. BIG HR can help you handle HR issues effectively with its comprehensive toolkits for clients.

    To watch this webinar in its entirety, check out the video below: 

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  • Next up: How to Implement an Effective Discipline Policy in 5 Easy Steps
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  • How to Implement an Effective Discipline Policy in 5 Easy Steps

    Be prepared to stop negative employee behavior in its tracks. Establish the right policies and procedures to handle employee discipline before it’s too late.

    If you have even one employee then you will have to deal with HR issues. Read on for some key tools, tips and secrets to addressing employee discipline and sleep better at night knowing your business isn’t being held hostage by a few bad apples.

    In a recent COSE WebEd Series Webinar, Cheryl Perez, founder and president of BIG-HR, discussed steps to take when an issue needing employee discipline arises in your company.

    Have you ever been in a situation where:

    • You are worrying about a few poor performing employees?
    • You are being taken advantage of by employees who are always calling off, running late or performing poorly?
    • You are concerned that an employee might retaliate?
    • You are wondering if a disgruntled employee could negatively impact your business?

    Make sure you act fast enough to correct the negative behavior; give yourself the confidence of knowing you’re handling everything right and in the best interest of your business. Follow these five steps.

    Step. 1. Set up your workplace rules of conduct. This should be an important feature inside your employee manual. Employees must know they have fair and reasonable notice of expectations. The number one mistake of small to mid-size businesses is they don’t have an effective manual in place or they don’t provide employees with it except on the first day of orientation. And often times it’s not kept up to date. Company rules should be clearly communicated in writing to all employees, must be compliant with state and federal laws, and must be consistently enforced.

    Rules of conduct within the manual should include day-to-day matters—such as tardiness, attendance and dress code—and more serious matters—such as violence, theft and harassment.

    Perez provided the following tips for your employee manual:

    • Customize it so you communicate exactly what you’re looking for.
    • Communicate your policies clearly and through a formalized training process, preferably on a yearly basis. Review the manual with your entire staff at the beginning of the year. Walk your team through the rules, making sure they have a clear understanding and sign off on it.
    • Meet with your managers separately to communicate the rules so you know they are enforcing your expectations.

    And she recommended that it includes information on the following basic policies:

    • Employment-at-will
    • Family medical leave
    • Discrimination
    • Drug-free workplace
    • Social media
    • Political neutrality
    • Disciplinary

    Step 2. Establish an investigation procedure. This lets people know you are fair and you are looking into any issues that arise at your company. This is especially good for more serious allegations such as harassment, being under the influence, theft, etc.

    If an allegation is brought up against an employee, it should be promptly, fairly and thoroughly investigated. Once the investigation is conducted and you have all information, you then need to make an independent determination of facts and circumstances.

    Before you find yourself in a position where you need to conduct an investigation, it is important that you establish protocol. Determine who will conduct the investigation, what process will be used and within what timeframe. Communicate this in advance to everybody on your staff.

    Step 3. Understand what an effective progressive action policy looks like. Here is a rundown of the order in which Cheryl recommends taking action.

    • Counseling: “You’ve been late, don’t let it happen again.”
    • Verbal warning: Sit down and give them a formal verbal warning. Let them know what will happen next. Document it, but informally.
    • Written warning #1: Write it up and have another manager or witness sign off on it.
    • Written warning #2: Do everything in the first written warning, but also include a performance improvement plan.
    • Next courses of action

    As mentioned in the fourth bullet above, a performance improvement plan can be an important part in taking disciplinary action. Let the employee know that if they don’t follow these expectations then you will move to the next step in the disciplinary process. Spell out the expectations and be sure to give them the opportunity to fix the behavior.

    Step 4. Provide employees with the opportunity to appeal. Your policies and procedures regarding employee discipline should include having in place a grievance and appeal process. Doing so makes it clear that your business practices fair discipline and that employees are given the opportunity to appeal decisions. Showing your due diligence and giving them the chance to say why they don’t agree helps to clearly communicates fairness.

    Step 5. Determine the next course of action and how to implement it. When you hand out a punishment for a crime, make sure it’s appropriate. Consider the following options:

    • Transfer the employee to a different department or office to get them out of whatever the situation is that is impeding their performance.
    • Demote the employee.
    • Tell them they don’t get pay increases, bonuses, etc.
    • Suspend them with or without pay.
    • Terminate the employee.

    The key is to always apply discipline in a fair and consistent manner. Your managers and supervisors must follow the same guidelines. You can’t be fair and consistent as a business owner but then have a supervisor who is showing favoritism. And, be sure that discipline procedures comply with federal and state laws.

    Put it in writing

    One of the best things you can do during an employee disciplinary process is to document everything. BIG-HR provides its clients with templates and forms for everything they need for proper record keeping.

    What happens if you don’t document? You won’t have a leg to stand on. If you do end up with an accusation against an employee you won’t be able to defend yourself. If you’ve done a good job protecting yourself, communicating and documenting, then there is much less of a chance that you and your company will have to settle with the employee no matter what type of situation arises.

    To watch a full replay of this webinar, check out the video below. And Be sure to register for the next COSE WebEd Series Webinar on February 20, Using Video to Amplify Your Marketing and Drive Results



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  • Next up: How to Maximize the My Health Plan Experience: Presented by Medical Mutual
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  • How to Maximize the My Health Plan Experience: Presented by Medical Mutual

      

    If you have a health plan though Medical Mutual, make sure you register for a My Health Plan account. Here are three tips on how to get the most out of your My Health Plan experience:                                                                              

    Take the Health Assessment

    The Health Assessment is a series of questions about total health covering emotional, social, financial and spiritual wellbeing. Your employees will receive a wellbeing score and steps for supporting or improving it. Employees should come prepared to take the assessment with recent medical data including height, weight, blood pressure, total cholesterol, HDL, LDL, triglycerides and blood glucose.

    Utilize the Health Resource Center

    The Health Resource Center offers extensive educational materials and interactive tools to help your employees gain great insight into their health concerns and conditions.

    Save Money with My Care Compare

    My Care Compare is an online tool that allows Medical Mutual members to compare costs before they get care. This information can be especially helpful for planning out-of-pocket costs if your employees are on a high deductible health plan. This also allows members to get medical procedure, service or treatment costs by provider and service location.

    To register or log in to My Health Plan, please visit Member.MedMutual.com. These helpful tools can also be accessed through the free Medical Mutual mobile app in the Apple app store or Google Play (search for MedMutual).

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  • Next up: HR Audits: When to Do Them and What to Look For
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  • HR Audits: When to Do Them and What to Look For

    There’s a lot for small businesses to stay on top of as it relates to HR. That’s why an annual audit, perhaps coupled with semiannual mini audits, are so important to ensuring a business is in compliance with applicable laws. Here’s when you should be performing these audits and what you should be looking for.

    As a business leader, I’m sure at some point you’ve asked yourself the question of whether you should conduct an HR audit. With HR having so many different components that are integral to the success of a company, there’s good reason to ask yourself whether your HR practices are as good as they could be.

    From compliance, to health and safety, training and development, recruiting and retention, compensation and benefits, there’s a ton to stay on top of!

    HR Audits can help a company understand the impact its HR practices are having on the organization and help quantify results as well as set the stage for necessary changes.

    While there is a lot to look over, particularly for small businesses, the potential of noncompliance with applicable laws is a significant risk. In this article, we’ll explore when HR audits should be conducted, what to audit, and how they can positively affect the organization overall.

    When to audit

    It’s best to do a full-scale audit once a year at most, given the resources required to perform them. That said, mini-audits conducted throughout the year can be valuable. Given every six months, these mini audits can provide for some level of course correction without too much departmental pain. Company leaders might also want to think about performing an audit following any significant event in the company’s history, such as management changes.

    What to audit

    Consider the weaknesses you’re aware of as it relates to your HR as well as what your available resources are. This should help guide your thinking as to what to audit. Keep a running log of issues that pop up throughout the year that might not be covered by your company’s policies and procedures. This will also help you identify areas you will want to address during your annual review process (or immediately, if need be.)

    Some common areas companies focus on during the HR audit review include issues related to hiring, performance management, discipline or termination.

    Other areas to think about include:

    • Misclassification of exempt and nonexempt jobs: The complexity of wage and hour laws and regulations means that almost every company has job positions that have been misclassified at some point in time. This could expose your business to liability for past overtime.
    • Inadequate personnel files: Reviews of personnel files often find things such as informal, vague or inconsistent disciplinary warnings; ambiguous, inaccurate or outdated performance evaluations; personal health information mixed into these files instead of being kept separate; and more.
    • Prohibited attendance policies: Just as it is with the misclassification of exempt and nonexempt jobs, the complexity of family and medical leave laws can also be difficult for companies to remain in compliance. The records generated by your system are your primary means of defense against wage and hour claims, so time-keeping policies and practices must be clearly communicated and consistently administered.
    • Form I-9 errors: Additionally, inadequate documentation is found around hiring practices, such as missing or incomplete Forms I-9. Employers face fines of between $100 to $1,000 for each failure to accurately complete a Form I-9.

    Kellee Perez is an account Executive at Benefit Innovations Group specializing in analyzing and implementing HR services within small and large businesses.

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