From: Staffing

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.

Preparation

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 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.