How Long Does a Business Need to Keep Employee Records After Termination?

After an employee is no longer employed by an employer, the employer still has an obligation to store that employee’s personal file in a secure location. As with most other records retention, the length of time that the employer is required to keep personal employee records varies, according to state and federal laws. These laws are strict regulations, and an employer who is unable to produce a terminated employee’s personal file, may face stiff penalties and fines as imposed by government entities.

Employee Personal Records

An employee’s record will contain all of the personal information and records pertaining to that employee. Information that can be found includes payroll records, benefit enrolment forms, and any other job-related information, not including health and medical information. These files are generally stored in the human resource department of an organization, and are only available to authorized employees on a need-to-know basis. Some organizations will opt to store payroll information separate from the rest of the employee’s file, but it will still be easily accessible. Information regarding an employee’s health and medical benefits, will only be available to HR staff and managers per the HIPPA privacy act.

FLSA Records

According to the Fair Labor Standards Act (FLSA), employers are required to keep and maintain all employee payroll records for hourly, nonexempt employees, for three years. These records include copies of pay stubs, proof of wage payments, proof of overtime wages paid, straight-time and overtime hours worked, payroll deductions, and other wage-related materials. The requirement for salaried employees differs slightly in that salaried employees are not entitled to overtime, therefore there will be no record or proof of any overtime hours. These records are to be kept for a minimum of three years after the termination date of an employee.

For records other than payroll, such as collective bargaining agreements, performance appraisals, and documents that justify pay scales, wage rates and salary levels, these documents need to be kept for two years from the termination date. Depending on the state that you are located in, state laws may require that documents be retained longer than federal laws require. Be sure to know what your state requirements are for maintaining FLSA records.

EEOC Records

The U.S. Equal Employment Opportunity Commission (EEOC) requires that employers keep and maintain all employment records for a minimum of one year after an employee’s termination date. The Age Discrimination in Employment Act (ADEA), requires that employers maintain payroll records for the same length of time as the FLSA does (three years from termination date).

When a former employee files a discrimination charge, the requirements for keeping records change. Under the federal civil rights law, when there is a dispute involving employees, employers are required to keep all records and employee files until the employer and the federal agency reach a resolution, or until the EEOC hands down a decision. Because a resolution could take years to reach, the employer will have to hold on to all the records until a resolution is reached, which means that they could be keeping and maintaining records for years after an employee’s termination.

Conclusion

Because there are various rules and regulations that control how long records must be kept, according to federal and state governments, it is essential to keep all documents for the maximum amount of time. If space and or security is an issue with maintaining private records retention, electronic formats are acceptable, and often this format is preferred. Essentially, it is a good idea to keep all employee records for a minimum of three years after termination date, unless state rules dictate a longer period of time.