When an employment relationship comes to an end, employers are required to keep their former employees’ files and documents in a secure location. The amount of time you should keep them will vary depending on specific federal and state regulations, but make sure you’re aware of the laws surrounding each document type to avoid potential government fines and penalties.
What is an employee termination?
The term “employee termination” describes the end of a professional relationship between an employer and an employee. Whether it be a voluntary resignation, a layoff, a retirement, or anything in between, the word “termination” covers all types of separations. That’s why many Human Resources departments use that terminology—to follow the same processes regardless of the specific circumstances.
What are employee records?
When managing the storage of employee records, here are some of the key items you should account for:
- Employee personnel files
- Payroll records
- Benefits enrollment forms
- Health & benefits records
- Pre-employment/employment Documents
- Retirement information
- HR policies and reports
Wondering what personnel records include? These are all the documents you collect during the onboarding process (like job applications, resumes, and inquiries) and records related to the employee’s time at your company (like your decisions about hiring, promotion, demotion, transfers, layoffs, recalls, selections for training, or discharge processes for that employee). Other personnel documents include job orders you submit to any employment agencies or unions for employee recruitment purposes, test papers, advertisements or notices of job opportunities you placed, and results of physical examinations.
Typically, the HR department should give access to employee information (except for health and medical records) if requested by certain staff members. When it comes to payroll records, some companies store the information in a separate, secure location but make it easily searchable by name or employee identification number.
Employee health and medical records contain highly sensitive data, which means they should only be accessible to a designated privacy officer, like an HR staff member or someone at the manager level. This level of confidentiality is key for maintaining employee privacy and is required as part of the Health Insurance Portability and Accountability Act (HIPAA).
Here are some other major regulations affecting the way you should keep employee files even after the relationship has ended:
FLSA for nonexempt employee recordkeeping
The Fair Labor Standards Act (FLSA) requires that employers keep payroll records for nonexempt employees for at least three years. This includes your copies of pay stubs, proofs of payments, hour logs for straight-time and overtime hours, payroll deductions, and other documents related to wages paid by the employer. Because nonexempt employees must be paid for overtime work, FLSA regulations are intended specifically for them.
For items like collective bargaining agreements, performance appraisals, and other documents related to wage rates or salary levels, the FLSA required minimum is two years after the termination date.
State recordkeeping laws might differ from federal regulations. In some cases, your state might require you to save certain paperwork for a more extended length of time than others.
EEOC recordkeeping requirements
The U.S. Equal Employment Opportunity Commission (EEOC) requires that you keep all personnel or employment records for one year after the employee’s termination date. In the case that an employee files a discrimination charge enforced under EEOC laws, you must keep those records until both parties reach a resolution or the EEOC issues a decision. This could take considerably more than one year, but make sure you hold on to all the relevant information, paperwork, and documents for as long as it’s needed and until the case is well and truly closed.
ADEA minimum
According to the Age Discrimination in Employment Act (ADEA) recordkeeping requirements, you should keep all payroll records for three years, similar to the FLSA rule.
In conclusion
At the end of the day, it’s in your best interest to keep employee files for as long as possible, even after that relationship is terminated. Not only will you be complying with federal and state regulations, but you’ll be protecting your small business in case of any questions that arise later on. With so many digital storage solutions and software platforms on the market, it’s easy to maintain your recordkeeping electronically so you don’t have to allocate extra space, time, or other resources for the process.
If you’re focused on slimming down your company’s file storage as much as possible, then the 3-year minimum requirements from both the FLSA and the ADEA are great to keep in mind. Otherwise, it doesn’t hurt to save employment files for your own future reference as well as for business compliance purposes.
Looking for more employee management tips and best practices? Head to the SmartBiz Small Business Blog to find helpful articles, infographics, videos, and more.
