NFIB

Protect Your Business by Maintaining Detailed Personnel Files
03/ 28/ 2002

Today's regulatory and legal environment makes it vital for businesses of all sizes to maintain complete employee records--from the employee's initial interview until the individual is no longer working at the company. In today's Workshop, Jeffrey Moses focuses on details that need to be included in these records.

Every small business should maintain a separate file for each employee that starts with information about the initial interviews (including any initial testing, employment application, referrals, previous work history and medical records), and continues through the employee's time with the company. The file should include salary changes, department changes, attendance records, performance reports from managers or supervisors, special recognition or awards and disciplinary actions or critical comments received. If you have to discipline an employee, keep documentation of all evaluations, hearings, meetings and actions, with emphasis on dates and individuals involved. An employee's file should conclude with the exit interview, which should be examined and signed by a manager within the company.

Any business that has dealt with litigation as the result of termination or disciplinary action against an employee understands the importance of maintaining complete and accurate employee files. In the case of litigation, an employee's official file can serve as support for any action taken. An employee may argue that termination or disciplinary action was unwarranted, but a paper trail in his or her file documents the reasons for such action.

Too often, small businesses record nothing beyond an employee's initial application and withholding stubs, leaving the company unduly vulnerable to litigation. Without written, ongoing documentation, a company's defense is merely verbal.

Employee records must be kept confidential, both during and after the employee's tenure with the company. In fact, according to the 1974 Federal Privacy Act, disclosure of personnel files and other types of confidential information, even by accident, may be grounds for a lawsuit. When the employee leaves the company, records should be maintained for a specified period. Consult with an attorney or state and local agencies to determine which records need to be held, and for how long. All records should be thoroughly destroyed by shredding or incineration when no longer needed.

It's easy to focus on the negative consequences of not maintaining employee records. But the accuracy and completeness of such records can also help when you're making decisions about promotions, salary increases and special assignments.

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