Personnel Records: The Good, the Bad and the Ugly

Editor’s Note: Will Oden is a member of the Labor and Employment Section of Ward and Smith, P.A.

RALEIGH – All employers maintain some type of personnel records, whether it is simply those required by the government or those that are used for additional purposes. It makes good business sense to have accurate information on all employees handy and organized, and there are times when documentation of an employee’s work history and performance can be of critical importance to the employer. What records are maintained and how they are retained, however, can make a significant difference.

Records Policy

The employer should have a written policy governing what information will be placed into personnel files, as well as in what manner and for how long the records will be maintained. The policy should define "personnel file" so that there is no confusion as to the identity of the file and where it should be stored to prevent unauthorized access. The written policy also should state where, when, how often, and under what circumstances, if any, employees may view and/or copy their own personnel file. If review is permitted, the policy also should provide a process whereby an employee can rebut or challenge information contained in the file or request that information be added to the file to explain information that could be interpreted as adverse to the employee.

Supervisors often want to keep a separate working file for each of their employees, which may include work samples, notes about discussions with employees, or feedback from customers and/or vendors. They want "memory joggers" so that discussions with an employee (such as during an annual performance review) will be as specific as possible. Such "shadow files" should be highly discouraged, as critical information in these files may not always make it into the employee’s official personnel file. This is especially important when an employee has more than one supervisor and each supervisor needs equal access to all information regarding that employee. Further, the existence of shadow files inadvertently may create an atmosphere of distrust; employees then may question the necessity of and purpose behind information being kept but being withheld from their official personnel files. However, if supervisors are allowed to keep such working files, they must be used only for their stated, limited purposes, with material being incorporated into evaluations or other formal documents for inclusion in the official personnel file in a timely manner.

Preparation of File Contents

All persons contributing materials to a personnel file should be trained on how to take good notes, including how to exclude subjective references that may suggest bias. These persons need to understand that any notes on any employee, whether or not placed in official personnel files, are discoverable in litigation.

Maintenance and Disclosure of Personnel Files

A single individual in the human resources ("HR") office of the business, along with a single alternate, should be specifically designated as being responsible for personnel files. All personnel records should be kept under lock and key, with special consideration given to employment and non-competition agreements. Given the importance of these documents, an employer should consider maintaining back-up copies in a different location or at its attorney’s office.

Since personnel files may contain confidential and sensitive information, access to such files should be granted to non-HR personnel on a "need-to-know" basis only. For example, a supervisor may need to review performance evaluations to determine whether to promote an employee, but may not need access to other personnel records pertaining to the employee. A log should be kept of everyone who views the personnel file, the specific access granted, the date of viewing, and the start/stop time. This information will help the employer defend against any legal action by an employee later claiming that negative employment actions were based on impermissible information.

In order to protect against identity theft, consideration should be given to assigning employee numbers to personnel files instead of using the employees’ social security numbers. For the same reason, any paperless personnel files should be password protected, with passwords only being given to the two designees described above, and with passwords changed no less frequently than every six months. Further, to the extent commercially reasonable, personnel information should not be transmitted via e-mail or discussed over a cell phone due to the increased opportunities for unauthorized receipt or interception.

Access and Review of Files by Employees

In North Carolina, personnel files for non-governmental entities are the property of the employer, and employers may establish their own policy regarding employee access to the files, provided that such policy is applied uniformly to all employees. If access will be granted to employees, the opportunity for the review normally should be provided as soon after the employee’s request as is reasonably practicable and convenient for the employer. An HR representative should be present at all times during each review in order to ensure that the employee does not insert or remove documents from the file. The HR representative should keep a log of all copies made. While the HR representative, and not the employee, should make any requested copies, the log creates an easy checklist to ensure all originals are returned to the personnel file.

Employers may wish to consider having any employee who reviews his or her personnel file to certify the accuracy of the information contained in it. Such certification can be added to the file after the review and is an easy way to combat an employee’s later allegations of impropriety in recordkeeping. If, on the other hand, the employee finds something in the file that he or she considers to be incorrect or incomplete, there should a procedure for the employer to consider any proposed correction or addition to the file. Utilizing a separate procedure allows the employer to evaluate each challenge/request independently and validates each review as being objective if all requests are handled in the exact same manner.

Retention

Federal law generally requires that personnel records be retained for the term of employment plus one year. Beyond that, specific documents kept within a personnel file may be subject to their own, longer document retention period. Generally, the maximum period for retention is six years unless there is a longer statute of limitations for written contracts or other causes of action. Payroll records may be helpful in defending against an IRS audit, so the employer may wish to retain those records longer. Employers must balance the expense of retaining old records against the risk of destroying files that could be used to protect the employer against any claims that may arise after destruction of the files.

For job applicants who are not hired, federal non-discrimination laws generally impose a relatively short timeframe for maintenance, typically one year. It may be beneficial, however, to maintain the files for at least two years because one of the best ways to combat a failure-to-hire type claim is to have evidence of other applicants who were not hired for the same legitimate reason. For the same reason, employers also should keep any related advertising materials and resumes received for the same period of time.

Summary

Whatever policy the employer develops, it must be followed all the time for all employees and all applicants. Documents destroyed ahead of schedule may imply a "cover-up" by the employer. In specific instances, employers should consult an attorney to determine if additional legal requirements particular to the employer’s situation mandate keeping personnel files for a longer period of time or handling them in a different manner.

© 2007, Ward and Smith, P.A.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.