Accurate and up-to-date personnel files provide protection when faced with litigation
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With unemployment reaching double digits, it may only be a matter of time until an employer will be sued over a personnel issue. But keeping accurate, up-to-date, consistent personnel files can help mitigate the damage.
“Many employers don’t realize the importance of personnel files until the files are requested or subpoenaed for employee legal matters,” says Thi Ha, human resources generalist at CPEhr, a human resources outsourcing firm.
The Society for Human Resource Management (SHRM) says there has been an exponential increase in employment related lawsuits in the last ten years. According to SHRM, companies are spending hundreds of thousands of dollars in legal fees. The spike in employee litigation is credited to new laws that were established in the early 1990s, such as the American with Disabilities Act of 1990 and the Civil Rights Act of 1991. Employees are also much more educated and aware of their rights to sue an employer, because information about employee lawsuits is circulated throughout the mass media.
According to SHRM, The U.S. Equal Employment Opportunity Commission (EEOC) received 80,000 discrimination charges in 2004. The cost of settling an EEOC charge increased almost 79 percent since the early 1990s. In addition, the median jury verdict in employee litigation as of February 2006 was $250,000, nearly double the average award in 1997.
“Personnel files are a historical time-line of an employee’s life cycle from hire to termination and will be useful when referencing current or ex-employees” says Ha. There are key policies and practices that should be put in place to ensure that the proper creation and maintenance of personnel files are followed throughout the organization. Regardless of size or the nature of the business, all organizations that have a staff of employees should maintain personnel files.
1. Establish Policies and Procedures:
Establishing and enforcing a policy that addresses the management of personnel files is the first step to ensuring integrity to the process. A clear written policy must be detailed in your company’s employee handbook. The policy may include how your employee files comply with applicable state and federal laws, securing employee files and the kinds of information that may be found in them (e.g. signed copy of updated employee handbook, information about pay rate, job change, job status, and performance appraisals) and finally, the process of how current or ex-employees may gain access to their personnel file.
2. Comply with applicable state and federal laws:
There are many employee documents that are required and must be retained for various lengths of time, including employee health records, benefits data and affirmative action documents. Many of these employee documents are required to satisfy such laws as Title VII of the Civil Rights Act, Fair Employment and Housing Act (FEHA), Americans with Disabilities Act (ADA) and The Fair Labor Standards Act (FLSA). “As a rule of thumb, employee files should be maintained through the entire employment lifecycle and housed for seven years after the employee has terminated,” says Ha. This will protect the organization in the event that files are requested or subpoenaed for employee legal matters. The Department of Labor is an excellent resource to find out what federal employee documents are required to be retained, along with length of time.
3. Ensure Privacy:
To insure privacy and security, employee personnel files should be housed in a locked file cabinet with access limited to the human resources manager. For practical purposes, terminated employees’ files can be retained separately.
Many organizations require advance notice in writing from current and former employees who are requesting the review of their employee file, within a specified time frame. Once a time is scheduled for the employee to review their file, a supervisor or human resources manager should be present. Employees have a legal right to see their files, but may only have physical copies of the documents that include the employee’s signature.
As a practice, human resources managers should track when information is released (photocopied and given to the employee). This can be a separate log that is included in each employee file that documents the date, time, specific information released and the initials of the human resources manager that released the information. Never compromise the integrity of your files by releasing actual employee signed documentation; a photocopy will suffice.
It is equally important to establish a privacy practice for employees who currently work within the organization, as it is for ex-employees. This will minimize adverse action by a manager that, if exacerbated can lead to a charge of discrimination. For example, if a manager reviews the employees’ medical information and finds out that their employee suffers from an illness that prompts the manager to act differently towards the employee then this may become a discriminating act by the manager based on the medical information that they reviewed. Or, a manager may find out that their employee is undergoing payroll garnishments and begin to make unfair judgments about their employee’s performance which in fact has nothing to do with the garnishment. To avoid such inadvertent acts, which can be misconstrued as unfair treatment of the employee by the manager, it is recommended that employers maintain a separate confidential file, as explained below.
4. Create Employee Files:
A simple uniform process in creating employee files will go a long way in maintaining organization. Ha recommends employers create two sets of files. The first set is standard individual files that may be accessible to both members of management and human resources. Each employee file should contain employee personnel information such as:
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• Performance reviews
• Status changes (e.g. full-time, part-time)
• Job application
• Resume
• Emergency contacts
• Payroll records
• Personnel Actions – disciplinary notices, promotions and demotions, discharge, lay-off, transfer and recall.
The second set of files is confidential employee files that may only be accessed by the human resources manager. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) employers are required to protect the privacy of employees’ personal health-related information by adopting procedures to keep them private. The American with Disabilities Act (ADA) requires employers to separate all medical records including physical exams, medical leaves, workers’ compensation and drug and alcohol testing. The individual and confidential employee files may also include information such as, wage garnishments, identification records, benefits information, first aid records regarding job injuries, reference checks, emergency contacts and drug and alcohol test records.
The only form that should be separate from both the standard employee file and confidential employee file is the Employment Eligibility Verification Form (I-9). These forms should always be kept in a separate file segregated from the others. An employer may have one I-9 file (unlike individual employee files) that includes all of the employees’ I-9 forms. In the event that The Federal Department of Homeland Security requests copies of these forms, you can release copies of the I-9 forms while maintaining the confidentiality of the rest of the employee files.
6. Audit.
Annual audits by the human resources department of all employee files will assist in maintaining consistent information across the organization. In addition, the audit process serves as the first indicator of any discrepancies or missing information that can be immediately resolved.
Instituting appropriate practices with regard to maintenance of employee information will provide protection to management in the event of a challenge. It will also enable the organization to more effectively identify training, promotion and retention initiatives that can only strengthen its productivity, customer service, and growth.
Monique Stennis, CPEhr
mstennis@cpehr.com