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Employment Records

What Are Employment Records?

Employment records, also known as personnel files, are records kept by an employer that track an employee's relationship with the company. These records can include basic information collected during the interview process, including:

  • Name
  • Contact information
  • Employment history
  • Educational background
  • Certifications and credentials
  • Interview notes
  • References

Employment records can also contain information collected during the hiring process, some of which employers are required to verify and keep on file by state and federal employment laws, such as:

  • Citizenship status
  • Social Security number
  • Payroll tax eligibility
  • W-4 tax withholding status
  • Exempt or nonexempt status
  • Photo identification
  • Employment start date
  • Job title
  • Pay rate
  • Proof of work-related clearances and credentials

Records generated over time can also form part of an employee's personnel file or employment record, including:

  • Time sheets
  • Performance appraisals
  • Disciplinary documentation
  • Payroll history
  • Benefits information
  • Official photo

Why Are Basic Employment Records Important?

Maintaining a basic employment record for each employee is a core legal responsibility of running a business. For example, knowing a person's full legal name, citizenship status, and Social Security number enables an employer to verify that a potential employee is eligible to work in the United States and withhold appropriate state and federal taxes from the employee's paycheck. If the IRS audits the company, management can produce a file for every employee that shows this information was collected and verified by the company prior to the start of work.

Likewise, employment records that include time sheets help substantiate that an employee was paid for all work done at the appropriate pay rate and received any benefits tied to those work hours. If an employee makes a claim for unpaid overtime or missing benefits, the employment record containing time sheets can form part of the record that the company can use to defend against the claim.

What Are the Benefits of Detailed Employment Records?

More detailed employment records help companies prepare for a wider array of contingencies. They also support a more standardized and systematic human resources process, which is often the goal of companies with large and diverse workforces.

For example, employment records that include evidence of an employee's credentials, clearances, and training can help a company prove that the person hired was qualified for the job in case of an incident that exposes the company to liability. Imagine a school that didn't have proof that a bus driver had the right driver's license for the job or that a teacher the school hired had a criminal record.

Large companies can face claims of discriminatory employment practices, such as in promotions or firings, and an employment record showing the history of performance appraisals and disciplinary actions may be the best way management can prove fair-handedness or that it followed standard company policy.

Best Practices for Maintaining Employment Records

The way a company develops and maintains employment records is not standardized across industries, although some best practices are common for well-managed businesses. At the basic level, a company must maintain employment records that contain enough information to comply with state and federal employment laws for that industry. Some federal and state employment laws also increase a company's record-keeping requirements based on the number of people it employs.

Beyond basic compliance with the law, best practices for developing an employment records system that covers most bases typically involve:

  • Defining what counts as a record. Not every piece of paper can be classified as an employment record. Determining what documents should go into a file to meet legal obligations and protect the company from liability should be established at the outset.
  • Creating a retention schedule. It's impossible to keep employment records for every past and present employee forever. Federal laws establish guidelines for how long a company must keep certain employment records after an employee leaves the company. Based on these legal requirements, a company should set a document retention schedule that clears out obsolete information while keeping all relevant material.
  • Limiting access. Only authorized personnel should have access to employment records. Establishing access protocols protects both the company and employee from misuse of the information.
  • Determining format and storage. Employment records can be maintained in traditional paper format in a file cabinet system; in digital format, where original documents are scanned into a computer system; or in a combination of both. Determining where employment records will be stored and how they will be accessed is a key part of developing a system that works. For example, many computerized accounting programs can accommodate employee information for payroll purposes that satisfies many federal and state employment law requirements.
  • Maintaining security and privacy. An important aspect of collecting information is maintaining the security and privacy of that data. Whether it's ensuring that the employment records room remains locked or the computer database storing the information has the latest encryption so hackers can't access the system, the company must take precautions to ensure that only authorized people have access to an employee's information.

Which Employment Records Should Be Maintained Separately?

Certain records require special privacy protections that are guaranteed under federal law. These employment records should be kept separate from an employee's basic personnel file and afforded a higher level of security with very limited access to insulate employers from liability. These records include:

  • Medical records. Under The Americans with Disabilities Act, employers must maintain the confidentiality of an employee's medical information by keeping medical-related documents separate from general records. This includes the results of drug/alcohol tests, workers' compensation claims, health insurance enrollment, medical conditions or disabilities, and fitness-for-duty results.
  • Credit information. Under the Fair Credit Reporting Act, employers must maintain the confidentiality of consumer-related credit information, credit reports, and personal financial data. So if an employer pulls a credit report to determine a potential hire's suitability or periodically pulls a credit report to ensure an employee's continuing financial responsibility, the records must be secured apart from the employee's main file and kept confidential.
  • Complaints and lawsuits. Documents related to any employment complaint made under internal company policy through a government agency, such as the U.S. Equal Employment Opportunity Commission, or via a lawsuit must be aggregated and preserved until the claim or suit is fully resolved.