In the last advisory I wrote, I discussed the need to document work performance issues to better defend against a wrongful termination lawsuit. One question that often arises is how long should an employer retain this documentation? Well, in typical lawyer fashion, the answer is…. it depends.
When it comes to personnel records, they should be retained in accord with the employer’s documentation retention policy (absent a litigation preservation notice—more on that below). The “standard” document retention policy will vary from industry to industry and employer to employer. Most jurisdictions—like Oklahoma—require an employee, who believes he or she has been subjected to discriminatory treatment on the basis of a protected class, to file a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) within 300 days (an employee bringing a discrimination claim under Oklahoma’s state law equivalent needs to file within 180 days). So, at a minimum, personnel records should be retained for at least 300 days plus the time it takes the EEOC to notify the employer of the charge. This leads some employers to retain personnel records for at least one year. But there may be other reasons to retain records for a longer period.
The first, and most common, reason to retain personnel records beyond a standard document retention policy is because the employer receives a demand letter or a litigation preservation notice. Receiving either of these puts the employer on notice of potential litigation and requires the employer to preserve all information relevant to the dispute and suspend the employer’s standard document retention policy to avoid the destruction of relevant evidence. If the dispute results in a lawsuit and the employer failed to preserve relevant information after receiving proper notice, the court may allow an adverse inference to be drawn by the court and/or a jury about the reason(s) for the missing documentation. In other words, the jury is allowed to conclude that the missing information was bad for the employer and supported the employee’s version of events and so the employer took steps to make that evidence disappear. Needless to say, this can be a disastrous ruling for an employer. So, employers need to take demand letters and litigation preservation notices seriously.
A second reason to retain personnel records beyond the period to file a discrimination claim is that an employee may bring a claim that is outside the scope of the discrimination claims. For example, an employee could allege he or she was a contract employee, and that the employer breached the employment contract. In Oklahoma, verbal contracts have a three-year statute of limitations period and written contracts have a five-year statute of limitations period. If an employer has employees falling into either of these categories, a longer retention policy is warranted.
And a final reason to retain records beyond a year is that the employer may be audited by other government agencies. For example, the Department of Labor (DOL) may audit time and pay records to determine if an employee was misclassified as exempt under the Fair Labor Standards Act (FLSA). While not requiring retention of personnel records, the FLSA requires employers to retain payroll records for at least three years. Given that much of the information the DOL may require during an audit are in personnel records, it may be helpful to retain these records for three years as well. Additionally, the Occupational Safety and Health Administration (OSHA) has document retention requirements depending on the industry and if an employee is injured. Again, personnel records may be beneficial to defend in possible litigation against the employee or a government agency.
There are a host of other considerations when it comes to document retention: storage costs, regulatory compliance, records to support tax audits, etc. In the end, personnel records are a small part of an employer’s document retention policies, but an important part. A prudent employer will ensure personnel records are retained to meet business goals and objectives while taking into consideration the points addressed above.