The addition of a second shop this year has us doing some hiring, and one key step in that process is setting up a personnel file for each employee. It may sound like a minor detail, but it’s important to do it right for several reasons. You have an obligation, for example, to protect your employees’ personal data. You have state and federal regulations you must abide by. And good personnel files can help protect your business if you have the misfortune of having an employee file some sort of complaint against you.
While state laws about employee personnel files vary somewhat (so always check with your own attorney), here are some guidelines I suggest. The first thing is true in every state: Personnel files should be stored in a locked file or office so that no one has access to them unless they have an authorized need to see them. The files contain sensitive, private data, and you don’t want someone viewing or removing items from them if they aren’t authorized to do so.
Here are the kinds of items we keep in each employee’s personnel file:
• The employment application. Employees have signed their application indicating the information is true and giving us certain rights during the hiring process. It’s important to have this documentation should an issue involving it arise.
• A signed acknowledgement that the employee has received our employee handbook and agrees that it’s their responsibility to read it and abide by company policies. We also use a separate signed acknowledgement indicating the employee received and agrees to abide by the company’s policy against harassment.
• Drivers’ license records. Our insurer requires a copy of Department of Motors Vehicles driving records for all employees who drive company or customer vehicles. Once the employee supplies us with this, we provide it to the insurer and keep a copy in the personnel file.
• Signed state and federal tax forms, such as the IRS W-4 withholding form.
• Direct deposit authorization forms. If employees give us written authorization to direct deposit their paychecks, this authorization goes in the file.
• Time cards or records. In my state (and probably many others) no matter how an employee is paid – hourly, commission, flat rate or salaried – they should be punching a time clock as a record of their actual hours worked. Much of this is now stored electronically, but any paper records can be stored in the personnel files.
• Attendance, vacation and absence records. You want to keep careful track of employees’ use of paid time off or other absences from work.
• Performance-related notices. Records of all warnings, discipline or termination of employees should be kept in their personnel file.
There also are some important restrictions on what should NOT be in the files – some of which may be surprising. Federal regulations, for example, prohibit employers from keeping I-9 records, the forms used to confirm that new hires are authorized to work in the United States, in personnel files. Those, too, must be retained and kept in secured files but separate from personnel files.
Medical records or information about an employee’s medical situation also should not be stored in the employee’s personnel file, but in a separate file that is locked and only accessible to those few people in the company with a need-to-know basis.
A final category of information that should not be stored in personnel files is investigation materials: reference letters provided to you by applicants, background check reports or materials related to an investigation of an employee’s violation of the company’s harassment or other policies.
Also make sure you understand your state’s rules about allowing an employee to see their personnel file. You generally are required to do so, but usually you can require them to make an appointment to do so. This can give you an opportunity to make sure the file is in order.
In an ideal world, you won’t need to access personnel files often. But if you do, having them complete can protect your business.
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