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Record keeping is the bane of any small business owner’s existence. There are a whole host of federal and state laws that require the creation and retention of records during and after employment.
Sometimes throwing in the towel seems to be the easiest thing to do. So why keep any records – paper or electronic? Beyond the state and federal requirements, the biggest reason is to present evidence of legal actions. As we have shared before, we see the modern day gold rush as the ability to sue your employer and unlike the criminal courts; business owners are guilty until they can prove themselves innocent.
So now we need to determine if keeping paper records suffices or if you want to go green and consider (or you’ve already begun the process of) going electronic.
Pros of going electronic
A huge benefit of keeping electronic records is that, in general, electronic records are treated as the equivalent to hardcopy original records. Most laws and agencies allow employers to keep electronic records in lieu of paper (although some states still require forms in hardcopy). Also, most laws/agencies require e-records to be accessible and readable for employee/agency inspection.
Going green is a political necessity and good for business. It saves trees, reduces the need for physical space and for staff to create, file, locate and update hardcopy records. It also allows for better organization and easier accessibility. You can retrieve the records instantly. Multiple people can view the information (but that is also considered a negative for security reasons).
Cons of going electronic
The bad side of electronic records is the privacy rights of employees at risk if security is breached. It allows access to private information and resulting legal violations such as identity theft. There are the upfront costs of labor, equipment and infrastructure. Fines get steep if it takes you a week to retrieve and format not easily searchable or readable documents or information. There are extra steps compared to hardcopy records when submitted in legal proceedings (mostly around electronic signatures verses hardcopy signatures).
So if we haven’t scared you into not going electronic, planning is essential. Since the law has not kept pace with ever changing technologies (think of the major changes of 10 to 20 years ago….floppy discs, desktops, networks and clouds) the future is uncertain and so you may need to be able to change technologies – but change it to what?
The typical rule of thumb has always been to keep everything. The legal costs that come with keeping everything can be extremely prohibitive. It has become “bad” to keep too much. Every document and voice recording must be indexed with optical character recognition or if you ever are sued, your attorney will have to pay someone to listen and create transcripts of every piece of recorded material for something that could be quite minor so it isn’t recommended you keep any recorded material you don’t want to pay to have someone type the transcript.
Pay attention to the fact that “any” device can hold records (particularly smart phones and personal cloud storage) and make sure all records are encrypted with complex passwords and in areas outside of non-necessary personal control. Additionally, greatly limit those with access (like who would have a key to a locked cabinet if they were stored as paper devices).
What needs to be saved?
Hiring Records. All job descriptions and job postings are part of hiring records. They identify the essential functions of the job expectations of your employees. Most importantly. they establish the minimum necessary qualifications of the applicants.
Job applications and interview notes. Believe it or not, you do need to save these (thus it is important to never make notes on a resume that could be considered in any way discriminatory). You will want and need to save the relevant information for the basis you made on your hiring decision. It is necessary to document valid reasons for selecting/rejecting applicants. If you have a moving line, this makes you a target for a discrimination charge.
Offer Letters. While we recommend that you not do offer letters (they have been interpreted by the courts to be implied contracts), many still use them. Make sure they are signed by BOTH parties if you use them.
Reference and Background Checks. Make sure you keep all the background information you use to make your decision. Avoid those legal pitfalls – Federal FCRA notices and disclosures (those pesky forms your background search company requires your employee to sign and also the waiver as part of the application that allows you to check the references your candidates provide to you). The biggest part of the reference check outside of a formal criminal, drivers, are credit checks, are the access to social media pages. There has been a lot of litigation on these as of late. Very important to pay attention to!
I-9 verification of identity and authorization to work in the U.S. It is highly recommended that you keep a separate file for these documents. The new I-9 requires you to be sure that all documentation is very readable (beware of Instagram photos) and most importantly, it requires the documentation to be in black and white.
Drug and alcohol tests and physical examinations. Make sure you have the consent for the test/exam. And if your business requires something like a TB test, you need to treat those results the same as medical records – meaning they need to be filed away from the rest of your personnel files.
Employee Handbook Acknowledgement. Your handbook should have a clear statement (in all CAPS and in bold at the beginning of your handbook) that confirms at-will employment. Also,be sure that the acknowledgment of receipt upon hire and later versions is signed.
During Employment What do you Keep?
Personnel File. Make sure you keep things such as the application, Performance Improvement Plans, and Performance Management Plans. Avoid documents that may be considered discriminatory information (like the information you obtain during an investigation that didn’t go anywhere). We have a very comprehensive list and if you would like it, please let us know and we are happy to provide it to you.
Payroll and other compensation records. You will need to keep copies of anything that the IRS wants from you. Additionally, you should keep information that must be provided to employees – records should confirm delivery or availability (e.g. pay “stub” available for viewing and printing form a payroll services website – unless your employees have no regular electronic access.)
Hours worked and taking breaks. You must keep the records and retain records when anemployee starts and stops work. You also need to keep the records when employees take meal and rest breaks.
Benefits records. Keep all your plan documents and the benefits records in a separate file. Also, time off is considered a benefit and it is recommended that you keep all requests for time-off along with a comprehensive record of time that your employee is entitled to and has used.
Medical information. Should an employee come to your requesting an accommodation for a disability, you need to keep copies of that and what you did to accommodate. You also need to keep copies of all of your workers’ compensation, OSHA compliance and Medical FMLA leaves of absences information. Plus, if you provide medical benefits, be sure to keep any copies of applications in their own files.
Personnel management related to promotions, transfers and progressive discipline. If you’ve worked with us, you know we believe in the three strikes rule. First strike is a verbal warning, which you should document the date you gave it and a brief description of what was said. The second strike is the written Performance Improvement Plan which is signed by the employee (and the employee may have written comments to be included)and any e-mails and other informal documentation that may exist. The third strike is the time to terminate. Be sure to also keep any e-records of a decision to terminate before the employee complains about discrimination and the like.
Reductions in force (“RIF”). Keep the selection criteria, the selection documentation and any adverse impact analysis (required if you are letting go more than 10% of your employee base).
Separation and release agreements. Keep the original signed hardcopy or electronic signature. Also be sure to keep the notice of severance offer and general release along with any special requirements for release of federal discrimination age claim by older workers (over the age of 40).
Electronic Information Management Issues
You still want to be more green and keep electronic records? Great, here are some things to make sure you are covered.
Security. Make sure you have strong security around private information such as medical records, social security numbers and date of birth.
System. Your system must be organized for uploading and quick retrieval. Be very reliable with a regular back-up plan.
Internal Policy. Create a written policy to not alter or destroy records except for formal document retention (and destruction) protocol. There is no legal requirement to keep everything forever.
Now that we are such an electronic-centric society, there are some other questions you must cover for yourself and your employees to make sure you are covered litigiously.
If you believe that going with electronic recording keeping is right for you, it is recommended that you complete a few things. Begin by establishing a written “Deletion Process & Protocol” – an actual written procedure of when you will delete and how. For example, youRemember to review interview notes before they are stored.They should be stored for 2 years and any written warnings should be signed and converted to a .pdf.
Performance Management Plans or other things that have a signature line for a manager must also be counter signed before scanning or they are considered invalid.
Have all records available to be indexed and searched via optical character recognition is HUGE! This is where the fines per employee can add up exponentially ($5,000 for first offense and $25K for each one after that).
Follow the processes in place that are set up by the provider when you obtain electronic signatures for validity.
When an employee signs a document that is then scanned it needs to go into a document that cannot be altered. It has been accepted by the courts that scanned copies are originals. PDF’s are the preferred format but not required as long as the document is unable to be changed and indexed.