This may not be the most exciting topic in employment law, but it is one of the most important: AS AN EMPLOYER, YOU HAVE TO KEEP GOOD RECORDS. Virtually every employment law requires the employer to do some recordkeeping, and anytime the employer fails to do so, the employer is the one that gets burned.
For example, the Fair Labor Standards Act, which regulates overtime and minimum wage payments, makes it imperative for an employer to keep the following records on each employee for three years:
- Identifying information such as full name and address;
- job title and duties if claiming exempt status for employee;
- rate of pay;
- hours worked each day and each workweek (by time card or time sheet if nonexempt);
- payment of wages, including overtime adjustments;
- all bonuses or other additions to wages;
- amounts and types of all deductions taken from each paycheck;
- total wages paid in each pay period;
- dates of payment and the pay period covered;
- commission agreements or other compensation related agreements.
These records need to be organized and accessible enough that they could be produced to a Department of Labor wage and hour investigator within 72 hours.
The foregoing list is only for that one law (FLSA). To battle payroll tax questions, discrimination accusations, immigration complaints and the myriad other employment law investigations and civil claims with which your company could be involved, you need to have an organized and deliberate system for keeping records about all of your employees.
This usually involves at least three kinds of files. First, you should have detailed and voluminous personnel file on each employee. I have many clients who are requested to bring me the employee’s personnel file when I am asked to defend the company in a discrimination case, for example, and all the business owner brings me is a thin folder containing an employment application and a W-4. I can usually predict the bad outcome of the case for the company right then, just based on poor recordkeeping.
This first set of personnel files ought to contain the application, W-4, I-9 form regarding eligibility for employment in the United States, a report to the Texas Attorney General of a new hire, interview notes, background investigations, training records, performance appraisals, disciplinary actions and warnings, signed acknowledgments of company policies, and termination documentation.
Second, you need a separate set of confidential personnel files with highly restricted access that are kept in a locked cabinet and contain medically sensitive information, such as insurance applications, drug or alcohol tests, physical exams (if you require them for physically-intense jobs), requests for Americans with Disabilities Act accommodations, documents related to use of sick leave or Family and Medical Leave, doctor’s notes and worker’s compensation history.
Third, you should keep payroll records like those set forth above, which are necessary to comply with the Fair Labor Standards Act. This file should also include attendance records, vacation requests, holidays off, records of raises, and other records that completely document the reasons and amount of the employee’s pay. Many employers keep all of these records electronically, which is fine, as long as you regularly back up your system so that no records will be lost.