The Dos and Don’ts in Record-keeping for HR

Episode Transcript

Pete Wright: Welcome to Human Solutions, Simplifying HR for People who Love HR from AIM HR Solutions on TruStory FM. I’m Pete Wright. And this week we’re talking all about paperwork though. Wait, hear me out. I know. I know this is not one of the most exciting topics, but it is a critical part of the HR job. Legally, there are requirements that employers must keep accurate up to date and secure records, but who’s keeping these records? Who’s responsible? And can you find all the records and reports that you need when you need them? It’s complicated and there’s a lot to track, but there are benefits beyond legal requirements. Having organized documents can make it easier for you to do your job as an HR professional, and our HR and legal experts are here to guide you through this daunting task. The dynamic duo of digital records, Tom Jones and Kyle Pardo are back, and they are going to do what many have thought impossible. Make paperwork pop. Tom Jones, Kyle Pardo, welcome back to Human Solutions. It’s great to have you both here. I feel like I should just ask the question outright. Is it, oh, what’s that? Excuse me. I’m just shredding some important digital records. Am I doing the wrong thing today?

Tom Jones: Like any typical lawyer answer is going to be, it depends. Right?

Pete Wright: Tom, you picked up exactly what I was putting down. So help me get my filing cabinet in order. What is the at a very high level, the purpose of record keeping from an HR?

Tom Jones: There’s at least a couple that come immediately to mind. One is to demonstrate that you’ve had that employee sign that particular record or document or whatever it is that was a compliance related request from the federal government or the state government could be tax related, could be immigration related, could be discipline related, any and all a number of those things. But also you want to be able to show that you’ve retained those records over the necessary period of time after the employee leaves, because so when an employee separates from employment, employers have to hold onto a great deal of information about that person for a number of years, to prove if in case litigation ever happened in the future, what they did was correct at the time that they were supposed to do it.

Pete Wright: Well, one of the things that we talked about, Tom, before in a prior episode was on leaves. We were talking about handling leaves. And if I recall there are some complicated and overlapping bits of legislation that we have to consider around leaves, whether state versus federal. The same thing under consideration here for record retention and record keeping and record maintenance, do we have state and federal things to think about?

Tom Jones: There are state and federal laws. They aren’t necessarily overlapping so much as they’re different. I’ll give you an example. The federal law controls immigration. So anytime you hire somebody, you have to have an I nine form for that person. And you have to retain that either one year from the date of termination or three years from the date of hire whichever’s later. State law may require that a personnel record file be retained for up to three years. So employers have to hold onto that, no matter what. It may contain information about people’s personnel file, performance, job application, resume, all these different things. So generally state and federal, don’t overlap so much in terms of the content, but rather they put different criteria than what has to be applied to federal or state law.

Kyle Pardo: I think, I mean, I always find it so confusing in the sense that you’re looking at state law. You’re looking at federal law. You’re looking at OSHA, immigration, so many different groups of requirements to follow, and people want to get rid of things when they can. They want to purge those documents, clean out their files, and that’s when it gets risky. And so I think always airing on the side of caution and keeping them, thinking about the one that requires you to keep it the longest is probably the best way to go.

Tom Jones: For example, there’s wage record. Both federal and state law have wage record because you want to be able to look back. An employee who went to sue the employer for nonpayment of wages or something has the right to look back at those records for either four years or three years, generally three years under the federal law, four years under the state law. So you have to hold those records like Kyle’s alluding to probably a good practice would be to hold the records for five years just to say, well, we’ve got this information just in case something comes up. But then the other issue that arises is what’s the proper way to destroy records? Is it the shredding that you’re doing earlier? The answer is.

Pete Wright: Feels like I’m doing fine, right? Tell me I’m doing fine.

Tom Jones: Well, you might be. The question is going to be, should you have held onto that information? Is it still within one of those timeframes that the law requires you to hold onto it? If it’s not, if it’s beyond the timeframes, the employee no longer works for you, there’s no risk of litigation with any statute of limitation issues, you’re probably fine. But I’d want to do that, frankly, with a professional service and have someone come in and destroy those records, rather than you just randomly doing it yourself, or you’d have to be able to document that you did it yourself in such a way to show that if the questions arose, you’d be able to say this was our normal course of action. After five years, we destroy all records associated with an employee.

Kyle Pardo: And Pete, I think this area has gotten a lot more fuzzy too, with people working remotely. It was forced upon a lot of people that they went remote a couple of years ago and maybe didn’t have a record retention process set up for that type of environment. And so now you have managers or HR people potentially working from home, printing off documents off their home printers, having some kind of makeshift retention system or filing system at home that doesn’t quite make its way into the official employee file. So that might be the first place that I suggest people or HR professionals look if they’re trying to refine their record keeping processes are who has records, where are they kept? Are they kept in a central place? And if you’ve moved to a digital record keeping process, what are you doing with those old records that you might have printed out and had sitting on your home desk?

Pete Wright: Well, that gets to sort of, I think the question of transition of those organizations who have not made the leap to digital or are in the process of making the leap to digital. What are some considerations to keep in mind about handling those transitions? Do you keep the original scanned or ingested documents for a certain period of time? Is there an overlapping period required there? And do you feel like you have more or less control over your record keeping process once you’ve gone digital than before?

Tom Jones: I think one of the things we see a lot of here at AIM has to do with on the round… I’m sorry, on the hotline has to do with people who in the world of HR like to do both the electronic version and have a hard copy. They tend to be real pack rats and hold on to things as long as possible. And they don’t want to give up control of that information for fear exactly what you’re alluding to, Pete, that somehow something might have gotten misplaced or lost in the computer system. So they’re very fearful of giving up control of that hard document. But I think once it’s in a system it’s secure that you’ve got the equivalent of sort of a locked drawer and a locked office on your computer system and all the information’s there, I think that’s fine.

Kyle Pardo: And Tom, do you think it is typically okay as long as you can reproduce the document, if there’s an audit, right? So if there’s an I-9 audit, or if there’s some wage and hour audit, if you could reproduce or print out the scanned document, then most instances that’s okay.

Tom Jones: In fact, the I-9 people make it clear on their website that you can store these documents electronically. The one quirky thing though, is that you still have to print it out for the employee to sign, and then you’d have to scan it back in.

Pete Wright: That is an interesting loop, digital analog loop.

Tom Jones: But you can definitely do it. The personnel files, you can save them online. Wage records, employment applications, all those necessary information, you can save online.

Kyle Pardo: That I-9 issue you just pointed out though, that’s pretty important because if you print it out to have somebody sign it, and then you scan it back into your computer, you are left with a paper document that has the social security number on it and has other personal identifying information. So it’s really important to have a process in place to get rid of that.

Pete Wright: That would not be in the like I have to keep this printed out page for five years, kind of a trap. You could have them sign it, scan it, and immediately put that in the queue for destruction.

Tom Jones: Yeah.

Pete Wright: The paper document.

Tom Jones: I think you’d want to be able to document what your destruction, document destruction process is. So if like once a month, you invite in some outside vendor that provides that, or you have those locked barrels that companies have in their workplace where you can put documents in it, and it’s out to a service every month or every three months or whatever it might be. And you’ve got the practice of doing that, then I think you’re in solid ground, but Kyle’s right. That’s a huge risk. If information like that floats around an office and someone sees it, that’s the risk of stealing someone’s identity pretty easily.

Kyle Pardo: The other important piece to that too, is an employee can ask to see their personnel file. And so again, with the paper version, typically what would happen is an employee would ask to see it, they’d be brought into a room in the office, and they could look through it and take a look at anything that’s in there. So if everything is digital, again, there needs to be a process of how would you share that information with an employee if they said they wanted to take a look at their performance evaluations or anything that’s write ups about them. So having that process documented as well is important.

Pete Wright: I’m curious about the other side of this, companies that are particularly conservative about keeping records for too long, right? It sounds to me like there is a push pull on, we need to keep things long enough to satisfy the requirements, but we definitely don’t want to keep things around too long. Are there risks with keeping records too long that we should air here?

Tom Jones: Well, legally that’s sort of an uncharted waters as to what that means litigation wise, but it does raise the question. So let’s go back to Kyle’s point about an I-9 audit. Some of the immigration services says you can get rid of them at a certain point. Let’s say you keep them for 10 years and not three years. You keep them much, much too long. An auditor comes in and looks at them and finds all these defective I-9s from years ago. You shouldn’t have kept them. Maybe it opens you up to further scrutiny by the Department of Immigration Services for failure to get rid of documents in a timely fashion, keeping incorrect documents. So it could create legal problems for you. It’s not always clear how aggressively the government will use that information, but it’s why have the hassle, they might end up digging deeper into all your files that they have access to.

Kyle Pardo: Yeah, it’s interesting because although there are times to let them go, there have been cases that have called upon the need to have records going far back. There was a case called the Lilly Ledbetter Fair Pay Act that went back, Tom, how many years did that go back in terms of looking at payroll records? It was 19,20 years, I think. It was quite a few years that a company had to go back and produce records. And so there really is that balance. If you don’t have anything to prove otherwise, the courts may go with whatever they have access to.

Tom Jones: The other thing we see every so often on the hotline is someone will say, we get contacted by some attorney about a personnel file. And I’ll say, well, do you still have it? He said, well yeah, we do. And of course it’s 20 years old, but they don’t throw things away. And so, I mean, it just creates more of a hassle because the attorney, who knows why they’re looking for it, but a better practice would be able to say, we get rid of these things every four years or five years, whatever it might be. And so according to our practice and policy, we don’t have that information. Otherwise, you end up having to go to your outside legal counsel to determine what’s the proper response. Do you give that information over? Do you deny it exist? How do you handle that?

Kyle Pardo: One thing we’ve noticed though, we do HR audits. And going through employee files, there are some companies that put everything in the employee file more than they should, where it might be supervisor’s notes on a meeting that may include information that could be used against them. It could be something discriminatory, or it could be something that would be better off if those notes were not kept in the employee file. But once it’s in the file and the employee asks for a copy of their file, or it’s discoverable, it could create more of a problem in those situations.

Tom Jones: Which goes right to the issue of having some sort of standardized practice about what should go in the file and when. And there’s a state law in Massachusetts that says what should be in that file, and only those things should be in that file. So for example, what religion someone is has no reason to be in that file, where political orientation, kind of what non-work related information you might have on that person, shouldn’t be in that file at all, because it doesn’t yield anything. And it raises the question about discrimination and their intent.

Kyle Pardo: Our recommendation typically is to have three files. So the first one is personnel information. Things like the employee’s resume, maybe their offer letter, but certainly performance reviews, any type of performance documentation. Think about it as a way as if the supervisor wanted to see an employee’s file. This is what the supervisor would have access to, things that are job related. The second file would be things with confidential payroll information. So they might have social security numbers. It might be a tax document. It might be a wage garnishment. So these would be not items that would be shared with a supervisor. And then the third one might be benefits related information. So enrollment forms, beneficiary forms, retirement information. So again, and that would be in case there was an audit. For example, you’re auditing your benefits enrollments, you would just pull that one file. So they can all be kept in the same place in the same file drawer, maybe just one file after another. And I guess there’s a fourth place, and that’s the I-9. We’d recommend keeping the I-9 separate. So those would be kept as a separate binder for active employees, and then the terminated employees in a different location. Again, because if there’s an event of an I-9 audit, you would have those already separated and not mixed in with the employee files.

Pete Wright: Tom brought up something earlier about the supervisor notes that sometimes get put into an employee file. If not in the employee file, where are those notes? Under what classification are those notes? Where do they exist? Because could those be, especially if they’re digital, could those be accessed or considered a part of some other document request?

Tom Jones: When the litigation comes in, the request comes in, the answer is, yes. Those notes are going to be reachable for purposes of discovery because the employee who’s going to file the litigation is going to say, well, yes, my day to day supervisor kept records, and they were on his or her computer. They were on his or her desk drawer. For example, it takes five points to get a demerit for being late for work. The supervisor keeps those five points, and then says after the fifth one, okay, you’re late for work. We’re now going to put this into the file as part of a process, but statements 1, 2, 3 aren’t necessarily going to be included in the file, but they might be for purposes of discovery for litigation. A second point would be that the supervisor may make notes to him or herself about this person’s performance to only to speak to them later in the year about it when it comes to performance evaluation time. So do those things exist? Yes, they may not be in the file yet, but if and when litigation were to occur, they would become part of that whole pile of information the employee would want to see as part of the litigation effort.

Kyle Pardo: And different states may have different requirements, but in Massachusetts, if you put anything in an employee’s file that could adversely impact a future employment decision, you have to let the employee know in writing that’s going into their file. So typically companies do that just by having it pre-printed on a documentation form, this will be going into your personnel file and that’s their notification, but it is important if you’re in different states to make sure if there’s other record keeping requirements like that.

Pete Wright: We may have covered this in an earlier question, but I’ll ask it because it’s here. And I have a related question. If let’s say you’re a company that is making the move to electronic document record keeping, what is your best advice sort of best in class organizations making this transfer to electronic? How are they doing it? What is the process to transfer over, make these records available, and ensure you don’t leave any loose ends behind you?

Kyle Pardo: I think it’s a big process, to be honest. Once it’s done, I think companies, it’ll be great. They’ll have access to it. But think about if you were taking your entire filing cabinet, depending it might be of 100 employees, and you are trying to digitize all of that. It’s going to be a lengthy process of scanning everything and making sure it gets identified or coded to the right employee and to the right place in your HR information system, making sure that, as we talked about the documents, original documents get destroyed properly. So many payroll systems or HR information systems have the ability to do this. And again, if you’re coding it, you would say that it’s a performance document or it’s a benefits enrollment form, or it’s an I-9 form. And so there’s ways to make sure then that it gets retained for the proper amount of time. But kind of the simple answer to your question is make sure you have a lot of time set aside for this process. It’s not an easy one.

Pete Wright: Well, that actually begs a question too, though. Which is, should you be trying to do this yourself? Or is this an outsource able kind of a situation?

Tom Jones: Yeah. You mean bringing a third party in to do it?

Pete Wright: Yeah. Bring in a third party to do the conversion.

Tom Jones: I think you could do that. You’d want to do it under a contractual basis, I think, where you’re going to make sure that you’re protecting the information. Same thing as anybody else, data security issues and that they give you back all the information, they don’t destroy it, but they give it back to you for you to make a determination about how you’ll destroy it per your policy. Theoretically, I’m sure companies do that. They’ll come in and digitize all your information. I’d want to do it with a contract.

Pete Wright: Yeah. I asked the question. I think that’s an important bit of guidance because I asked the question because I can imagine in our fictitious manufacturing firm with a single HR manager and lots of employees and trying to manage a lot of balls in the air, I can imagine, hey, here’s a scanner. Let’s go ahead and digitize all of our records, and go figure out how to do that. And I’m sure that has happened. I am sure that has happened. And I am also sure that 15 things you’ve said in our conversation today would be news to that HR person.

Tom Jones: Things get lost in that process.

Pete Wright: Right. So…

Tom Jones: Simple… Yeah, because especially you put the HR person under the gun, they’ve got six other duties they’re doing. And then you say to them, well, by July 1st, you must have this done because we’re going to merge with another company or we’re going to do something. And of course now, people make mistakes. They’re under pressure. They forget something. They miss a document.

Pete Wright: Scan some documents twice, forget to scan others at all, piles get confused.

Kyle Pardo: And I think also deciding who’s going to have access. Who are the people that can add things to a file? Is that one central HR person, or are you going to allow supervisors to scan things and add them to a file? And then who has access to look at information that’s in those digital files? So I think that’s a decision before getting started.

Pete Wright: You mentioned HR information systems. Do you have recommendations of particular systems that you like and trust? Does AIM have a particular framework that you appreciate and trust?

Kyle Pardo: We don’t. And a lot of people ask us for that. I think most often you’d want, first of all, want to make sure it’s something that ties into your payroll system because that would be the easiest way to do it. And so very often payroll systems will have that as an add-on component, but there’s not a specific one that I can recommend. But a lot of it probably depends too, on the size of your company.

Tom Jones: One thing we used to do at AIM when we had these round tables every month, people would get together, that would be the type of question you’d pose to a person sitting next to you and saying, hey, we’re thinking about getting a new system. What do you have? And they’ll say, well, we have a great experience with this, or don’t even go near them. They’re terrible or whoever. And that’s a good exchange of information, but it’s really based on that sort of networking, understanding within somebody else say, this is our demands, this is what we wanted, the system did or didn’t work out, and here’s why. But that’s where you get a good flavor from somebody else what exactly was the good in the system. One other thing I wanted to add about Massachusetts law on personnel records. So if something goes into a personnel file and you don’t like it under state law, you have the right to substitute your own version of that event. And that has to be retained in the file.

Pete Wright: Substitute as in replace?

Tom Jones: Well, not substitute, supplement.

Pete Wright: Supplement. Okay.

Tom Jones: So if there’s something in the file, I then say, I don’t like that version. And so I offer my own version of what happened. Both of them have to be retained in the file. It was actually a recent court case. Go ahead, Kyle.

Kyle Pardo: An example of that would be if I wrote your performance evaluation and you didn’t agree with my summary of what your performance was, you could write your own addendum if you will, and add that into your file. So if somebody was looking at it later, they’d have both my version and your version in there.

Tom Jones: Exactly.

Pete Wright: Has that caused any legal cases of note?

Tom Jones: This past winter, probably the first case in 20 years, there was any significance. This guy was written up for performance. He didn’t agree with the management’s what he did. He put in his own version of that saying that it wasn’t due to the same reason the company said. He actually got fired the same day he put that information in the file. He sued claiming that he had the right to put that information in there and that they were denying him his legal protections by firing him, and he won.

Kyle Pardo: And that might be viewed as retaliation, right?

Tom Jones: Right, absolutely.

Kyle Pardo: That the company disagreed with it, yeah.

Tom Jones: Legal protection under the law, you can do it. I mean, the truth is, this law I think was created back in a time when if you go to apply for a new job, someone says, sure, you can look at the personnel file. Nobody shows that to a would be employer nowadays ever. Nobody ever does that. And so the best they’ll do is say you worked here from this date to that date. Your job was this, and your responsibilities were that. And that might be it. Back in the old days, they used to say, oh, we give people the personnel file. No one does that I’m aware of.

Pete Wright: Fascinating. Well, I’m going to stop shredding stuff because you’ve made me nervous. And I think I need to put the brakes on some of my own process. But I am sure glad you guys have both joined me here to share your insights on record keeping. See listeners. I told you they were going to make paperwork pop. Did I not deliver? This has been great. Thank you, Kyle Pardo, for making the time. I’m glad you made it. I’m glad you made it to the show today. Good to talk to you.

Kyle Pardo: Absolutely. Thank you.

Pete Wright: And Tom Jones, thank you as always.

Tom Jones: Thank you, Pete.

Pete Wright: All right. And thank you everybody for downloading and listening to this show. As always, you can find links and notes about the show at AIMHRsolutions.com. You can listen to the show right there on the website or subscribe to the show on Apple podcast or Spotify or anywhere else your favorite podcasts are served. Thanks everybody. We’ll catch you next week right here on Human Solution, simplifying HR for people who love HR.