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What should be kept in an Employee File and who should have access to it?

Friday, January 03, 2014

An employee file, also known as an employee record, is a paper or electronic folder made up of employee documents that detail an employee’s lifecycle with the company, from recruitment right through to termination or resignation.

Laws such as the United States Equal Employment Opportunity Commission (EEOC) and the Fair Labor Standards Act (FLSA) establish what information is required to be collected, what your company can do with that information, and how long you should store employee records.

Managing employees also means managing their paperwork. From the day they’re hired, each member of your staff will accumulate a variety of documents that will increase in volume throughout their tenure with your company. Storing these files is your legal requirement as a small business owner, as is keeping the files secure and having them only accessible by the individuals who have permission to view them.

While a large amount of documents can be placed in an employee’s general file, certain sensitive employee information needs to be separated out from the general file and placed in a secure location. Because only certain employees can view these sensitive documents, and because the regulations surrounding recordkeeping can be confusing, this article will focus on what should and shouldn’t be kept in a general employee file and which members of your team should have access to which information.

Before we begin, it’s important to note that specific states and federal agencies have different requirements for employee file keeping. It’s a good idea to periodically check with your state or agency’s “.gov” website to look over these individual requirements to stay informed and updated to make sure your company is in compliance.

What should be included

As soon as you’ve hired a new employee, you should start building their employee personnel file. Typically, these files should represent an “objective” timeline of an employee's journey throughout your company – their application, resume, evaluations, promotions/demotions, and transfers, among others. This is not a file to place confidential notes about an employee that HR would typically review; stay with official documents and files you’d be alright with the employee seeing. Next, let’s look at what documents can be included in the general file.

The following documents can be placed in the general personnel file:

  • Recruiting and screening documents such as job applications, resumes (clean copy with no notes), and educational transcripts
  • Job descriptions
  • Employment offer letter (signed by the employer and employee)
  • Records relating to job offers, promotions, demotions, transfers, and layoffs
  • Compensation information
  • Direct deposit authorization
  • Training records
  • Employee handbook and policy acknowledgements
  • Employment agreements (e.g., non-compete, confidentiality agreements)
  • Letters of recognition and awards
  • Warnings, counseling, and disciplinary notices
  • Performance evaluations and goal-setting records
  • Termination notice with corresponding documentation
  • Emergency contact information

What should not be included:

There are some documents that need to be stored in your company, but due to confidentiality regulations and HIPAA requirements, need to be kept in a separate file that only certain members of your staff can view. These files consist of information that’s not pertinent for managers or employers to have daily access to, but need to be kept on record for Human Resources (HR), tax purposes, and in the event a lawsuit is opened up against your company, among other reasons. Limit storage and day-to-day access to employee files to a single individual or department who has a “need to know.” The confidentiality of the employee information is of utmost importance.

These files include:

  • Pre-employment records (with the exception of applications and resumes)
  • Whistleblower complaints, notes generated from informal discrimination complaint investigations
  • Ombudsman notes (An ombudsman is a certified professional who works to represent organizations and people in a variety of situations and mediate conflict in a professional setting)
  • Workplace climate notes (Workplace climate is the employees’ perceptions and feelings about their work environment)

Medical records

  • Medical questionnaires
  • Doctor’s notes (missed work due to illness, special work accommodations)
  • Medical leave records
  • Workers’ compensation claims
  • Benefit enrollment forms
  • Beneficiaries
  • Short- or long-term disability documentation

Confidential files

  • Reference/background check results
  • Drug test results
  • Equal employment opportunity (EEO) – self-identification of gender and race/ethnicity
  • Affirmative action – self-identification of disability and veteran status
  • Child support/garnishments
  • Arrest history
  • Litigation documents
  • Workplace investigation records (relevant disciplinary actions and other direct communications are placed in the employee’s general personnel file)
  • Requests for employment/payroll verification
  • Form I-9 (This is the Employment Eligibility Verification form which is used to verify the identity of a prospective employee and their legal authorization to work in the United States)

To assure that your employee files include the necessary documents, it’s a good idea to perform periodic reviews of the contents. Many companies complete this document review during annual employee evaluations. Staying up-to-date on changes to your employees’ files will help you better manage any unneeded, missing, or misplaced documents.

Who should have access?

Human Resources department: The HR department should have access to both the employee’s general file and the confidential file. HR is the employee’s go-to for a plethora of employee questions and concerns, so it’s important that HR has easy access to all the files they’ll need to properly address each issue.

As some employee documents deal with medical information, it’s important that both confidential and general files are kept secure and confidential to only designated HR employees to ensure compliance with HIPAA laws. Supervisors and managers should be informed by HR about any pertinent medical exemptions, health benefits, or necessary accommodations, and not the other way around (unless the employee shares that information with supervisors on their own accord).

Furthermore, HR will assist employees and payroll with any court-ordered litigations that could entail: 1) reviewing employee drug testing, 2) withholding employee pay for child support or garnishments, 3) making employee adjustments according to affirmative action.

Payroll: Some confidential files will need to be available to payroll to fulfill their duties; likewise, some general files will also be necessary. For this reason, payroll should have access to forms on a case by case basis, and could find themselves switching between general and confidential file folders.

For example, one of payroll’s duties is to properly withhold compensation from each employee's paychecks. To do this, they need access to the employees’ W-4s to figure out each employee’s tax bracket, and will also need access to employee medical benefits in order to know whether any employees need withholding to cover health plan premiums. Furthermore, additional deductions such as child support amounts must also be available. In order to gather this information, the payroll department will need access to both general and confidential employee files.

Payroll will deal with many situations like this, so it’s important that all departments of your business work together to ensure payroll has access to only the necessary files it needs for a given circumstance. If payroll or management ever have any concerns regarding which files payroll should be allowed to access, they should refer to their HR department.

Supervisors/Managers: Each employee’s supervisor should have access to employee personnel files to help make a wide range of decisions like hiring, onboarding, promotions, transferring employees, performing evaluations, and terminating employees.

Managerial staff will be the ones most often creating, editing, and reviewing employee general files. This should make the filing of documents such as disciplinary actions, evaluations, and commendation notes easier as they’ll be the ones performing them. After performing such actions, the supervisor can simply give a copy to the employee and file away the original.

In the event a lawsuit is opened up against your company, an employee’s personnel file may become evidence, so this is one more reason why it’s in your business’s best interest to store all relevant documents concerning an employee’s employment at your company.

Where should employee files be located?: Both employee general files and confidential files should be located in the HR department in a secure location, and should only be viewed by those with authorization to do so. The best practice is to place them in a locked, fireproof filing cabinet or drawer. If employees want to view their general file, managers should bring the employees to HR rather than bring the files to the employees.

How long should files be kept?: File retention requirements vary from state to state and across different industries, so be sure to check with your state and guidelines for file retention timelines. The general recommendation is to keep all employee files that are tax related for six years, and employee files related to hiring, firing, or managerial action for 10 years. Doing this will help keep your company better prepared if a prior or current employee sues your company for unlawful termination, discrimination, improper pay deduction, etc.

When should employees be notified?: It depends on the state and industry, but in general, employers must notify their employees within 10 business days of any document added to an employee’s general file.

Recap

When your business is able to construct an efficient and systematic approach to storing paperwork, the massive amount of employee documents will be less overwhelming and easier to manage. Every business has a legal obligation to construct a general employee file and a confidential employee file and to know which documents go in the general file and which ones go in the confidential file.

Proper employee file keeping will enable all departments of your business to have streamlined access to necessary files and allow them to complete their jobs more efficiently and accurately.

This will allow managerial staff to focus more on building up employees and being involved with larger business decisions rather than constantly chasing down files. Likewise, HR and payroll will be able to assist and compensate employees with less hiccups and lost work hours.

Lastly, keeping the correct files and retaining them securely could make the difference in winning or losing a lawsuit against your business, so it’s in your best interest to make sure these folders are secure, retained for the recommended amount of time, and accurate.


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