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Top 5 Mistakes When Maintaining Employee Personnel Files

Vol. 26 Issue 4

Post Categories: Law, Management

As you hire employees in your company, you will end up with a significant amount of information about them. It is important to know what information should be documented and retained—and how best to handle those records. If you don’t do it right, your company may be in danger of federal or state enforcement actions and civil suits. 

Competent risk management also requires an organized and thoughtful approach to record-keeping. It’s easy, however, to let some record-keeping “musts” slip when you are running a small business.

Here are the top five mistakes small businesses make when it comes to maintaining employee personnel files.

Failing to Implement Documentation Practices

Not every document belongs in a personnel file. Employee files should include the job description, application, resume, offer of employment and terms of employment. The position and rate of pay, W-4 details, performance evaluations, disciplinary actions and termination documents also should be included.

Train your human resources manager or other designated employee on documentation practices. Supervisors and managers also should be trained on the importance of documenting relevant performance issues and discipline.

Keep employee files organized. Health information, workers compensation information and medical certifications should be kept separate from the general personnel file. Employers may want to keep payroll and compensation information separate as well, including any wage garnishments.

Finally, do not treat the employee personnel file as a “catch-all” file for any document referencing the employee. Instead, the human resources manager or other designated employee should capture and retain documents relevant to the employee’s performance, compensation, performance, investigations, discipline and separation.

Lack of Training on Proper Documentation

Employee files are company records, just like any other files. This means that documents in an employee file may become exhibits in a lawsuit years later. This makes it particularly important for supervisors and managers to prepare performance reviews and internal communications and complaints in a thorough, accurate and professional manner. You can save a lot of headaches (and possibly some money) if you train your managers on the right way to handle these matters.

Not Limiting Access to Employee Records

Employers should limit access to personnel files. Personnel files contain information about employees’ addresses, job histories, health information and disciplinary actions. Employers should restrict access to personnel files to only those who truly need to see the information, such as the human resources manager and owner.

Employers can be held liable for failing to maintain the confidentiality of employees’ medical and health information. That makes it critical for employers to ensure that this information and documents are kept confidential, and only those with legitimate need for the information can access it.

Maintaining Health Records in Personnel Files

Employers are required to maintain employee medical and health information in a separate file. Federal law allows employers to require an employee to complete a medical examination after an offer of employment has been made and prior to the employee performing his or her duties. A company may make the results of the examination a condition of the offer of employment.

Federal law also requires, however, that information obtained about the employee’s or applicant’s medical condition or history be treated as confidential medical records. They must be maintained in separate forms and in separate medical files. Supervisors and managers may be informed about necessary restrictions on the work or duties of the employee and necessary accommodations.

Records pertaining to FMLA medical certifications, recertifications or medical histories are required to be maintained as confidential medical records in separate files/records from the general personnel files.

Not Maintaining Personnel Files

The biggest mistake employers can make regarding personnel files is not keeping them at all. A well-documented personnel file is key to protecting the employer in audits and lawsuits. Well-kept personnel files allow the employer to properly supervise and to review employees’ performance.

An employer often must demonstrate when, how and why an employee was disciplined or terminated. Employee turnover makes it likely that co-workers who had personal knowledge of events leading up to an employee’s discipline or termination may no longer be employed. The employer then must rely on documentation in the personnel file. That’s when employers of all sizes see clearly the value of properly maintained personnel files.