Documenting and Managing Personnel Files

From: Staffing

Documenting and Managing Personnel Files


Scenario 1

It is 4:30 on a Friday afternoon. As Mr. Smith collects his things to leave, he receives a call from an Office of Federal Contract Compliance Programs (OFCCP) Officer. The officer informs Mr. Smith that a complaint has been filed with his office and an on-site review/investigation will be conducted first thing Monday morning. As part of his investigation, the officer wishes to examine the personnel records of all employees employed within the past two years. He says “good-bye.” Mr. Smith’s plans for a relaxing weekend on the beach have suddenly transformed into a stress-filled three days of preparation.

Scenario 2

A disgruntled employee has filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging employer discrimination in promotion opportunities. The EEOC investigator calls and informs the employer that she would like to conduct an on-site visit to review the personnel file of the former employee and other relevant persons. The on-site visit is in four days.


Scenarios 1 and 2 are not regular incidents, but in the event of their occurrence, employers must be prepared, as follows:

  • All records in personnel files must be accurately and properly maintained.
  • All employment activities.

Failure to maintain accurate personnel files subjects organizations and employers to liability. For example, personnel files should not contain any potentially damaging information, such as interview notes containing insensitive, inappropriate comments. Employers must be confident that all documents in the personnel files could adequately defend all employment decisions. Current and accurate personnel files assist the employer in tracking the workforce, organizing hiring and retention, and protecting the organization from liability. Failure to properly maintain the personnel file can subject the organization to unnecessary litigation.

This article will provide helpful tools and practical guidelines to assist with the proper maintenance of personnel files throughout the employment relationship. Additionally, the material will examine those documents that should never be included in the personnel file, as well as policy considerations regarding access to personnel files and the benefits of periodic file review.

Documenting the Employment Relationship

Ensuring proper maintenance of the personnel file begins with effective documentation, such as preparing accurate and complete personnel records.

The keys to effective documentation include the following four crucial principles:

  • Maintain a legal perspective. In preparing documents, employers should always question what type of impressions or assumptions a judge or jury would draw from the documents. Years after creation, many of the documents contained in an employee’s personnel file can potentially be subject to the scrutiny of both a judge and a jury.
  • Ensure that documents maintain a degree of objectivity. A document commenting on a comparison between an employee’s performance against established goals is often less likely to reflect supervisory bias than a document containing a subjective comment that the employee “has an attitude.” Employers should always focus on specific job-related deficiencies of the employee, as these can be objectively measured.
  • Statements must be fact-driven, rather than conclusory. Factual statements are more legitimate and persuasive than conclusory statements. This is particularly true in cases of performance evaluations and the imposition of discipline. It is more persuasive to state that an employee “was over 20 minutes late to work twice this week, on Tuesday and Thursday (listing specific dates) in violation of our tardiness and attendance policy,” versus stating, an employee is “often late to work.” By properly recording the facts, the employer makes a position clear, eliminating the need to later scramble to provide a basis for its employment decision(s).
  • Ensure that documents are accurate. Mistakes in documentation can be costly. For example, improperly filling out an EEO-1 report can result in an affirmative action audit by the federal government. Additionally, management’s failure to obtain an employee’s signature verifying receipt of the employer’s sexual harassment policy can have disastrous liability consequences in a future lawsuit.

Additionally, every document produced and created should contain the following:

  • Date on which the document was created and/or amended.
  • Name and signature of the document’s author.
  • Page numbers (such as page 1 of 3).
  • Names and signatures of any witnesses (if applicable).

Documenting Pre-Employment Hiring

Pre-Employment Documentation

The relationship between employer and employee usually begins with pre-employment activities, such as completion and submission of an application, background checks, and the interview. All pre-employment activities generate numerous documents, which must be retained. Retention of pre-employment documents for nonselected candidates is imperative; retaining some of these documents in a newly hired employees personnel file is a matter of policy. However, retaining the background investigation and interview notes in the personnel file of a new employee may be poor decision.

Placing these documents in a newly hired employee’s personnel file serves no real purpose, as they are not related to the employment relationship and creates a disorderly file. Rather, such information should be retained in a separate file that documents the entire interview process. In retaining accurate and thorough documentation of the interview process, employers may be protected from liability when a disgruntled applicant fails to obtain an interview or the position. Such thorough files may provide evidence that the employer’s selection process is focused, fair, and the person selected was the most qualified applicant.

Hiring Documentation

The employment relationship begins during the pre-employment phase and the creation of the personnel file begins on the date of hire. The first day on any job usually involves an employee spending a good portion of the day completing paperwork, from benefit information to a Form I-9. The issue is whether all such documents should be filed in the new hire’s personnel file. Importantly the documents retained in an employee’s personnel file should create a paper trail, detailing the steps taken by management in orienting a new employee to the organization.

For example, upon hiring the employee the following documents should be placed in an employee’s personnel file:

  • Job description for the employment position.
  • Offer of employment.
  • Job application.
  • Employee’s résumé (if provided).
  • Form W-4.
  • Signed Acknowledgement of Receipt of an employee handbook.
  • Forms relating to employee benefits.
  • Forms providing next of kin and emergency contacts.
  • Document acknowledging receipt and review of the Employer’s Code of Conduct.

Employers may also include a checklist of the items presented to the employee at orientation. This checklist should be reviewed and signed by the employee and placed in their personnel file. The signed checklist prevents an employee from later claiming, in the midst of litigation, that the employee failed to receive a harassment policy or other crucial documentation.

New employees are also required to complete a Form I-9, which verifies the employee is eligible to work in the United States. However, this document should not be retained in the personnel file. Many government agencies are authorized to inspect Form I-9 when visiting a workplace and if the Form I-9 is maintained in the employee’s personnel file, the government is given the opportunity to search entire personnel files. As such, an employer’s files would be subject to much broader governmental scrutiny. Anything found in the files may be inspected and may raise additional issues or questions. By keeping a separate I-9 file, employers have the ability to furnish an inspecting agency one file containing all Forms I-9. Thus, an employer maintains control of all records and substantially limits the scope of the inquiry.

Documentation During Employment

The bulk of the paperwork generated in an employment relationship is during an employee’s tenure. Proper maintenance of employee documents can be helpful in the event of a lawsuit. Improper maintenance, however, can be extremely harmful.

Compensation Records

Proper maintenance for employee compensation records is essential. The federal Fair Labor Standards Act (FLSA) requires an employer to make, keep, and preserve payroll records.

The following chart lists the record retention requirements under the FLSA and the Equal Pay Act:

Records to Be Retained   Statute   Period of Retention   Form of Retention
Wage and hour records, summary payroll records (for example, the number of hours each employee works, pay rates, total wages, total deductions, date of payment, and the pay period covered by the payment)   FLSA   3 years after the last date of entry   No particular form is specified
Basic time and earnings cards, work time schedules, records of additions to or deductions from wages, overtime earnings, records explaining any wage differentials between employees of the opposite sex (for example, job descriptions, job evaluations, merit, incentive, and seniority systems), and wage rate tables  
FLSA   3 years after the last date of entry   No particular form is specified

Equal Pay Act

  2 years   No particular form is specified

An employer’s failure to retain and properly maintain these records subjects the employer to costly penalties and lawsuits.

Similar to those documents retained during the hiring process, compensation documents should detail an employee’s compensation history. Salary increases and/or decreases as well as denials of raises should be well documented.

The following compensation documents, as well as other additional documents, should be included in the personnel file:

  • Form W-4.
  • Attendance records.
  • Pay advance request records.
  • Garnishment orders.
  • Compensation history record.
  • Compensation recommendations.
  • Authorization to release payroll information.
  • Notification of wage and/or salary increases and/or decreases.

It may also be beneficial to maintain certain compensation documents in a separate folder, such as the following:

  • Documents detailing the actual pay rate of an employee.
  • Daily/weekly timecards and/or time sheets.
  • Amounts and dates of payment.

Retaining such documents in a separate folder reduces the amount of paper in the file and eliminates possible investigations arising from a governmental agencies inspection of personnel files. Regardless of where these documents are kept, it is essential that all compensation records adhere to the four principles previously discussed.

Performance Evaluations

Performance evaluations are important weapons an employer has when defending a wrongful termination suit. Proper documentation and retention of evaluations can mean the difference between ending a lawsuit at summary judgment and a forced court action where the employer must defend the organization before a jury.

Evaluations must be conducted in a timely fashion. For example, evaluations may be completed yearly, every 30 days, or every 90 days. Regardless of the schedule time frame, the schedule must be followed consistently and universally throughout the organization. Employers should also document when these reviews will be conducted, require the employee’s signature on an acknowledgement form, and place the form in the personnel file. If a follow-up session is scheduled after a 90- or 30-day review, an agenda for the session should be prepared detailing those items/goals previously discussed. Any resolutions or decision reached during these sessions should similarly be documented, signed by both the reviewing supervisor and the employee, and placed in the personnel file.

When preparing an evaluation, it is imperative the evaluation be clear and concise, utilizing the four principles previously mentioned (legal perspective, objectivity, fact-driven, and accuracy). Additionally, the evaluation should provide the following:

  • Identify the standard of behavior or performance by which the employee is judged.
  • Make clear that the employee was aware of the standard.
  • Specify any failures(s) to meet the standard.
  • Afford the employee the opportunity to correct behavior or improve performance to conform to the appropriate standard.
  • Specify what action will be taken if the employee fails to meet the established standard.

The evaluation should also be fair. For example, the performance rating must mirror the actual performance. The recipient of an outstanding performance rating must meet the standard required for such rating. Otherwise, inaccurate evaluations may later be used against an employer. For example, a multimillion dollar judgment was entered against an employer in a sex discrimination suit after the employer consistently overrated an employee, giving her outstanding and above average ratings. The employer overrated the employee in an effort to appease the employee, but failed to accept the employee’s applications for promotion despite the high ratings. The employee’s evaluations failed to reflect the true nature of the employee’s abilities and thus left the employer open to claims of discrimination where an allegedly outstanding employee was repeatedly denied promotional opportunities.

Upon completion of an evaluation, an employee should review the performance evaluation and be permitted to make any comments, whether positive or negative, about the evaluation. The evaluation should be signed and dated by the employee, acknowledging receipt and review, and placed in the personnel file. Oral evaluations, whether positive or negative, should also be documented and placed in the file, again employing the principles previously stated.

Employee Discipline

Similar to performance evaluations, documents used in disciplining an employee — whether oral or written — can protect an employer against lawsuits filed by a disgruntled employee alleging that a termination was motivated by discrimination or retaliation.

The disciplinary action, whether oral or written, must be properly documented at the time of the infraction. Postponing a discussion with an employee regarding disciplinary matters until the performance review increases an employee’s chances of successfully arguing that the discipline was a pretext for either retaliation or discrimination. Additionally, properly documenting the disciplinary problem at the time of the occurrence eliminates any temptation to later rectify documentation deficiencies — a practice frowned upon by courts.

Disciplinary warnings should also be reviewed by the employee and signed, acknowledging that they have reviewed the notice/warning, and then placed in the employee’s personnel file. However, documents relating to internal confidential investigations, such as sexual harassment investigations should be maintained in a separate file. Employers may be protected from an employee’s, or another whose conduct is discussed in the course of the investigation, invasion-of-privacy claims by retaining these documents in a separate and confidential file.

In addition to those documents previously detailed, the following documents, if applicable, should also be included in the personnel file:

  • Training documents, such as the following:
    • Training history records.
    • Training program applications/requests.
    • Skills inventory questionnaire.
    • Training evaluation forms.
    • In-house training notification letters.
    • Training expense reimbursement records.
  • Benefits documents, such as the following:
    • Life insurance application.
    • Vacation accrual/taken form.
    • Request for leave of absences.
    • Retirement application.
    • Payroll deduction authorization.
    • Hazardous substance notification and/or reports.
    • Tuition reimbursement application and/or payment records.
    • Annual benefits statement acknowledgement.
    • Safety training/meeting attendance/summary forms.
  • Employee relations documents, such as the following:
    • Report of coaching/counseling session.
    • Employee Assistance Program (EAP) consent form.
    • Commendations.
    • Completed employee suggestion forms.
    • Suggestion status reports.

Documenting the End of the Employment Relationship

The end of an employment relationship can either be amicable or contentious. How the relationship ends will determine what documentation needs to be placed in the employee’s personnel file.

In a typical employee separation, such as resignation, the documents placed in the personnel file should include the following:

  • Exit interview form.
  • Final employee performance appraisal.
  • Exit interviewer’s comment form.
  • Record of documents given with final paycheck.
  • COBRA documents.

Again, these documents, as others in the personnel file, should follow the four principles.

An employer’s decision to terminate an employment relationship, while including the previously mentioned items, must be supported by proper documentation. The personnel file should contain convincing proof of a violation of a rule or policy for which the employee is being terminated. If the documents in the file cannot alone support a termination, termination may not be the appropriate action. In the case of a reduction in force, any business decision supporting the reduction needs to be adequately documented so those employees selected for layoff will not later use the lack of documentary support as favorable evidence in a discrimination suit. Failure to properly document the reduction in force may result in the organization explaining its employment decision before a jury.

Note: The aforementioned information is not exhaustive and serves to only provide a cursory overview for determining which documents should be included in a personnel file.

Document Maintenance and Access

Self Auditing

The employment relationship and required documentation is governed by many different governmental regulatory agencies, each maintaining different priorities and compliance requirements. Many laws, covering such topics as discrimination, safety, and immigration, charge governmental regulatory agencies with specific objectives and require certain documents when regulating an employer’s compliance with these laws. Consequently, an effective plan for limiting an employer’s exposure to liability can protect employers from potentially devastating consequences resulting from either a governmental audit or the document request of a plaintiff’s attorney.

Periodic self-audits are an important tool in avoiding legal disputes. While numerous laws make a self-audit increasingly complicated, the potential benefit of identifying and proactively addressing potential claims cannot be understated. Employers who fail to conduct periodic evaluations of their policies, procedures, and practices may find themselves with a multitude of legal liability. When conducting a self-audit of personnel files, an employer should ask the following questions:

  • Does the file reflect all of the employee’s raises, promotions, and commendations?
  • Does the file contain every written evaluation of the employee?
  • Does the file show every warning or other disciplinary action taken against the employee?
  • If company policies provide that written warnings or other records of discipline will be removed from an employee’s file after a certain period, have they been removed?
  • If the employee was on a performance improvement plan, a probationary or training period, or other temporary status, has it ended? Has the file been updated to reflect the employee’s current status?
  • If the employee handbook has been updated since the employee started working for the organization, does the file contain a receipt or acknowledgement for the most recent version?
  • Does the file contain current versions of every contract or other agreement between the employer and the employee?

In performing a self-audit, through asking the previous questions, an employer can be confident that personnel files will be the best defensive weapon against a discrimination claim.

Documents Not to Be Included in a Personnel File

Employers should carefully consider how to file each and every personnel document maintained. The law requires that employers keep a separate file for medical records, but a solid defensive strategy would also include separate files for other types of employee information.

Employment Eligibility Documents

As previously mentioned, employers should keep Forms I-9 in a separate file. While an employer is permitted to photocopy the documents offered by an employee as proof of work eligibility, such practice is not required. Employers who choose to photocopy and retain these documents should not retain the information in a personnel file. Such a practice can generate a resource of information for a plaintiff or regulatory agency seeking to investigate discriminatory employment practices.

Medical Records

Medical information, such as pre-employment physicals, medical surveillance information, injury reports, medical questionnaires, workers’ compensation reports, and drug-testing results, should be maintained separately from the employee personnel file. Employers must limit access to medical information due to privacy and confidentiality concerns and regulations. In fact, a great deal of governmental regulations exists for employers to consider in regard to the maintenance and retention of medical records.

The Americans with Disabilities Act

The Americans with Disabilities Act (ADA) enforces specific guidelines in regard to the gathering and maintenance of employee medical information. For example, prior to an employment offer, all disability related inquiries made by an employer must be job related.

The ADA has a narrow exception to the prohibition of pre-employment medical inquiries. An employer may condition an offer of employment on the results of a medical examination as long as the following criteria are met:

  • The examination is given to all entering employees.
  • The results are kept confidential.
  • The examination is not used to discriminate against individuals with disabilities; however, results may prove that the individual is unqualified for the particular job.

Additionally, the ADA imposes very strict rules for handling medical information obtained during employment. The ADA prevents employers from practicing the following:

  • Requiring a medical examination before making a job offer.
  • Inquiring as to whether an employee has a disability.
  • Inquiring as to the nature or severity of any disability unless the inquiry or examination is job related and consistent with business necessity.

The results of any medical examination must be kept confidential, and segregated from the personnel file. However, the ADA recognizes that employers may have a legitimate need to disseminate the results of medical tests or other medical information, and allows confidential medical information to be shared with the following persons:

  • Supervisors who need to arrange necessary work restrictions and make necessary reasonable accommodations.
  • First-aid and safety personnel, should emergency treatment be required.
  • Government officials investigating compliance.

Employee medical information must be disseminated under the appropriate conditions. Moreover, it is important for employers to strictly limit the amount of information shared to only the amount of information required to answer an inquiry.

The Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act (HIPAA) was enacted to improve health insurance coverage in the group and individual markets; to combat waste, fraud, and abuse in health insurance and health care delivery; to simplify the administration of health insurance; and for other purposes. Under HIPAA, covered entities may not use or disclose an individual’s protected health information without the authorization of the individual unless specifically required or allowed by the privacy regulation.

While employers are not covered entities, they are affected by the privacy rules based on their sponsorship of health plans and procedures for dealing with the health information of 50 or more participants. If an employer does not have 50 participants in the company health plan, they generally need not be concerned with HIPAA restrictions. Effective April 14, 2004, HIPAA’s privacy rules became effective for sponsor small health plans. A small health plan is one that paid premiums or claims of $5 million or less in their most recent plan year.

For employers subject to the privacy provisions of HIPAA, the requirements are more stringent for self-funded plans than they are for fully insured plans. Self-funded plan requirements are more stringent because HIPAA assumes that if an employer has a fully insured plan, the employer generally does not have access to protected health information (PHI). In self-funded plans, employers who make initial or final claims determinations need PHI to make claims decisions. This protected health information is protected under HIPAA.

The Family and Medical Leave Act

The release of confidential medical information is also regulated under the federal Family and Medical Leave Act (FMLA), particularly if an employer requests medical certification or requires an employee to take a fitness-for-duty examination when returning from FMLA leave. It is crucial for employers to maintain any tests or results from a medical certification in a separate medical file, apart from the general personnel file.

Background Investigation Records

Every employer’s ultimate goal is to hire and retain hard working and productive employees. However, employers may have difficulty in effectively evaluating an individual’s capabilities based on an application form and one or two interviews. Employers may choose to further investigate an applicant through a background report. Background reports are sensitive and confidential by their very nature, and by law they must be restricted to those individuals who are directly involved in the hiring process. A thorough reference and background investigation may be able determine if the applicant will become a welcome addition to the team or a threat to the employer, employees, or customers. Additionally, courts may determine that an employer has a duty to conduct a background investigation, especially under circumstances where the failure to conduct a background check creates a liability for negligent hiring or retention.

Under the Fair Credit Reporting Act (FCRA), employers must comply as follows:

  • Clearly disclose to the applicant, in a separate document, that a background check is being prepared by a third party.
  • Acquire a signed release from the applicant before checking records such as criminal convictions, pending criminal cases, driving records, credit reports, or educational credentials.
  • Provide the applicant with a copy of the report and a notice of legal rights if the employer intends to deny employment based on the information contained in the report.

The FCRA is designed to balance an employer’s interest in assessing a potential employee with the employee’s right of accuracy and privacy regarding their credentials.

Safety Records

The Occupational Safety and Health Administration (OSHA) regulates and monitors workplace safety. Employers should maintain all safety-related records in a separate file for the same reason all Forms I-9 should be maintained in a separate file, to allow an OSHA auditor to see only OSHA-related records during an OSHA audit. This safety record file might also contain documentation relating to an employee’s participation or involvement in an OSHA claim or investigation — limiting access to such documentation would make it easier to keep the information from influencing possible adverse decisions against the employee that could in turn result in retaliation claims under OSHA.

Access to Records

Approximately half of all states regulate the maintenance of and access to personnel records. For example, some states have placed restrictions upon the use and release of personnel information with regard to child care employees, sworn police officers, and employees of the state’s public and university school systems. Additionally, some state laws require employers to allow employees to inspect and /or to obtain a copy of their files. Access to personnel records is usually subject to some restrictions, for example, inspection only in the presence of management or a prohibition against removal of information.

Most public sector employees have the right under state laws to examine their personnel file. Some states permit public employees to have access at a reasonable time. Public employers should have a policy in place (or defer to an official department policy) that defines the parameters of a reasonable time so employees may enjoy their right of access, without unduly interfering with the employer’s mission.

The reasons for limiting employee access to their individual files are not so much legal as they are practical. In certain instances, management may not want an employee to view various types of test results or criticisms of performance. In other cases, a disgruntled or unhappy employee may request to see the file, and proceed to scrutinize the entire record for the purpose of finding a basis for a lawsuit against the employer. This is especially true of former employees. For this reason, granting access to former employees is not recommended unless legally required. In the event an employee asks a specific question about what is in a file, management should consider providing an answer or document relating to that specific question or read a document to the employee, rather than turn over the entire file.

Review of an employee’s personnel file by third parties should also be carefully controlled. Employees who feel damaged by improper disclosure or referral practices have filed defamation lawsuits. Thus, many employers have adopted strict nondisclosure rules or a policy of providing only “neutral references,” and thereby only releasing the former employee’s name, position, and dates of employment.

In light of the growing number of defamation lawsuits based on disclosure of personnel file information, some states have legislation providing that an employer will be immune from liability based on providing job performance information to a former employee’s prospective employer. However, an employer may incur liability if proven that the employer produced information that was knowingly false, provided with malicious purpose, or violated a civil right of the former employee under state law. Notwithstanding such laws, ample room remains for lawsuits based on employer-provided references. For employers who have a policy of providing references to other employers, it would be wise to obtain a waiver from a current employee prior to their departure from employment. Generally, however, a strict nondisclosure rule may still be the safest option. Often, human resources managers will receive a subpoena from a party in a lawsuit, requesting the production of documents (including personnel files) regarding a former employee. Because the subpoena requires compliance under authority of the court, producing the requested documents in this compelled manner will generally not subject the employer to defamation liability. In such a case, the other party in the lawsuit has the burden to object to an improper request.

Federal law requires that records be maintained for job applicants, current employees, and former workers for certain prescribed lengths of time, so that government agencies will have material to review during investigations. A table outlining the primary federal recordkeeping requirements with regard to what information must be kept and for how long is included at the end of this chapter.

In addition to personnel information normally retained in the course of business, the Equal Employment Opportunity Commission (EEOC), state and local EEO agencies, and other agencies require that once a complaint of an unlawful employment practice has been received, the employer must preserve all personnel records, production records and other evidence which may pertain to the complaint until the matter has been resolved. Similarly, the breadth of an investigation into a complaint may extend beyond records relating to the charging party, and include records regarding all employees holding positions similar to the one held or sought by the charging party.

Federal Recordkeeping Requirements

Documentation   Retention Requirements
Personnel records including application forms and records concerning hiring, promotion, demotion, transfer, layoffs, terminations, and terms of compensation.   1 year from date of personnel action taken with respect to the particular record or date record was made — whichever is later (29 C.F.R. 1602.14).
Records relevant to complaint of unlawful employment practice.   Until final disposition of charge (29 C.F.R. 1602.14).
Employers with 100 or more employees: Copy of EEO-1 Report.   Copy of most recent report filed for each reporting unit must always be retained at unit or company/division headquarters (29 C.F.R. 1602.7).
Federal contractors, subcontractors: Affirmative Action Plans.   No period specified (2 years recommended).
Form I-9.   1 year from date of termination or 3 years after creation — whichever is later.
Written employee benefit plans; merit or seniority systems.   While plan is in effect, plus 4 years after termination of plan (29 C.F.R. 1627.3).
Payroll or other records containing each employee’s name, address, date of birth, occupation, rate of pay, and compensation earned per week.   3 years from date of creation (29 C.F.R. 1627.3).
Supplemental basic records, including wage rate tables, time schedules, and order and shipping records.   2 years from date of creation (29 C.F.R. 1620.32).
Records pertaining to certification of leave as qualifying under the Family and Medical Leave Act (FMLA) and any disputes regarding such certification.   3 years from date of creation.