Equal Pay Act and Retention of Personnel & Payroll Records

by Donald S. Skupsky, JD, CRM, FAI

Question: Regarding the Lilly Ledbetter Act of 2009 (Equal Pay Act), I have read articles (some from attorneys) that recommend that employers need to modify their record retention policies and begin retaining records that involve pay decisions permanently. Do we now need to retain all our personnel and payroll permanently?

Donald Skupsky: As you indicated you were reading an article, not the law. The law does not establish an indefinite retention nor even change anything regarding retention. We have seem many articles by attorneys who know nothing about records retention. This is another nice-sounding idea with really bad unintended consequences. However, the retention conclusion in the article is probably wrong.

Here is my opinion:

Our normal retention for personnel records is ACT+6 (during employment + 6 years) and 6 years for payroll records (with Minnesota 8 years). The statute of limitation remains the same at 300 or 180 days from the last paycheck. However, if discrimination is claimed, then the law allows the claimant to review all past paychecks for previous discrimination. But, the law also sets a 2-year limitation on the period for which lost wages can be recovered.

For purposes of personnel files, the file would still be in existence for 6 years after the last paycheck, and thus would be available in litigation. In additional, all personnel files for other recently terminated employees and all current employees would still be in existence. This would be true to normal paper files or other unit records, where all the personnel documents are kept together for the entire retention period.

However, in some new electronic record keeping systems, personnel transactions can be destroyed in 6 years after the transaction date. So for these systems and for payroll, you would only have the last 6 years’ worth of records. Since the law supports this 6 year retention, and there is no duty to keep personnel record in “contemplation of discrimination litigation,” I doubt if any judge would dare find the retention practice unlawful — they just have NEVER second-guessed a reasonable retention period that complies with the published legal requirements. But, who knows. This could lead to some very interesting cases.

Thus, in reality, while the intent of the new law is to allow review for all previous years, in many organizations there would often only be 6 years’ worth of records to review. While reviewing even these records will still be a great burden, it would also save the company huge discovery costs for following appropriate retention practices.

Since the law sets a 2-year limitation on the recovery period, you can only recover underpayment of salary for the last two years However, the law would allow all employment records to be searched forever for evidence of discrimination and perhaps to determine what the salary should have been for the last two years.

Of course, you need the records for other legal and operational purposes. Thus, the ACT+6 and the 6-year retention is still applicable. Thus, my previous position remains unchanged. I would not change retention policy based on this new law.

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