In the ever-evolving regulatory environment of California, maintaining compliance with employee records retention laws is a critical aspect of business operations. This blog post aims to provide employers with a comprehensive understanding of the state's requirements for retaining employee records, ensuring they stay compliant, and avoiding potential legal pitfalls. Imagine responding to a records request and realizing that your records are incomplete.
Introduction to Employee Records Retention
Employee records retention refers to the practice of keeping various types of employment-related documents for specific periods. These records can include but are not limited to, payroll records, time sheets, employment contracts, and performance evaluations. The purpose of retaining these records goes beyond mere compliance; it also aids in resolving any future disputes, conducting audits, and fulfilling other legal obligations.
California's Legal Framework
California's laws on employee records retention are among the most stringent and confusing in the United States. Employers must navigate a complex web of state and federal regulations, each with its own rules regarding the type of records to be retained, the retention duration, and the storage manner. Key statutes include the California Labor Code, the Fair Employment and Housing Act (FEHA), Title VII, the Americans with Disability Act (ADA), the Age Discrimination in Employment Act of 1967 (ADEA), the Family Medical Leave Act (FMLA), CA Fair Pay Act and the California Occupational Safety and Health Act (Cal/OSHA), among others.
Key Requirements
Below is a summary of key requirements under California law, though employers should consult THRM to ensure comprehensive compliance:
Payroll Records: California law requires employers to retain payroll records for at least four years. This includes information on time cards, schedules, pay stubs, unemployment insurance, deductions, variable pay plans, wages, employment contracts, and hours worked. It is recommended that employers keep records related to employee vacation/PTO accrual for the duration of employment plus four years after termination in the event there is a dispute about unpaid vacation/PTO)
Personnel Files: These records should be retained for at least four years following an employee's termination. These files should include performance reviews, promotions, disciplinary actions, and employment contracts.
COVID-19 and Employee Health Records: Under Cal/OSHA, employers must retain records of occupational injuries and illnesses, first aid records, drug and alcohol test records, and records regarding COVID-19 cases for at least five years. Employee notices related to COVID-19 exposures should be retained for three years. Chemical safety and toxic exposure records must be kept for the duration of employment plus 30 years.
Recruitment, Hiring, and Job Placement Records: Employers should retain job advertisements/postings, salary information, employee referral records, and resumes/application forms for at least four years after the hire or non-hire or the duration of any claim or litigation involving hiring practices. These records should be retained for all applicants, including those who were and were not hired.
Family and Medical Leave of Absence Records: When applicable, related records such as policies, leave requests, and logs should be retained for at least four years.
Employment Eligibility Forms Verification: Retained separately from personnel files, form I-9 should be retained for three years from the hire date or one year after termination.
Unlawful Employment Practices, Claims, Investigations, and Legal Proceedings Records: Related records should be retained until the disposition of the case or as directed by counsel.
Employee Benefits Data: To comply with ERISA requirements, employers must retain related data and documents such as benefits elections, beneficiary designations, eligibility determinations, COBRA Notices, and summary plan descriptions and earnings for at least six years but not less than one year following plan termination. Records related to retirement benefits, including 401(k) and similar plans, must be kept indefinitely.
To effectively manage employee records retention, California employers should adopt several best practices:
Develop a Written Policy: A clear, written records retention policy helps ensure consistency and compliance across the organization.
Regularly Audit Records: Periodic audits can help identify and correct any compliance gaps.
Secure Storage: Whether records are stored physically or electronically, security measures must be in place to protect against unauthorized access or loss.
Timely Destruction: Properly dispose of records no longer required to be retained to protect privacy and reduce liability.
Conclusion
For California employers, diligently adhering to employee records retention requirements (both paper and electronic) is a necessary part of business operations. By understanding the legal landscape and implementing best practices for records management, employers can navigate these complexities confidently, ensuring compliance and protecting their organization from potential legal challenges.
Remember, while this post provides a foundational overview, laws and regulations are subject to change and are different if your employees are in other states. Contact your THRM consultant or Edna Nakamoto to learn more about current requirements, regulations, and best practices in employee records retention.