Employee Records: Five Keys For Wellness Businesses

READING TIME: ABOUT 5 MINUTES

For most wellness business owners, employee recordkeeping is far down the list of priorities.  Yet careful and complete documentation makes both legal sense and common sense.

Medical Economics highlighted the importance of keeping careful personnel records in its April 2007 article “Personnel Files: Documentation Is Key,” by Gail Garfinkel Weiss.

With their permission, we’ve highlighted key points and added a few of our own:

What are the major federal requirements? 

Federal laws require you to keep a wide variety of documents containing information ranging from hiring, compensation, performance, and termination to benefits and more.  Check with an employment attorney or human resources professional, since the detailed recordkeeping requirements vary by statute and may apply differently to very small businesses and certain types of businesses.

While not an exhaustive list, following are some of the most commonly applicable federal employment laws:

• The Civil Rights Act of 1964 – prohibits discrimination based on race, color, religion, national origin, and sex

• Americans with Disabilities Act – guarantees equal employment opportunity for individuals with disabilities

• Age Discrimination in Employment Act - protects individuals who are at least 40 years old

• Immigration Reform and Control Act – requires employers to verify via Form I-9 that employees are eligible to work in the United States

• Fair Labor Standards Act - imposes minimum wage and overtime pay rules

• ERISA - protects participant in certain benefit plans

How about state requirements?

Some states impose additional requirements – ranging from overtime pay requirements to antidiscrimination rules - on even the smallest employers. Consult an employment attorney to get the specifics for your state.

You can also get a list of state agencies that regulate the employment relationship at the US Department of Labor website.

What’s the best way to keep employee information secure?

Maintain separate, locked files for each major category of personnel data: 

1) job-related data like employment applications, reference letters, key contact info, and performance evaluations

2) health-related information like requests for reasonable accommodation (required by the Americans With Disabilities Act) or health-related work restrictions

3) payroll-related information like compensation, paid time off and hours worked

Only employees with a valid reason should be able to access each set of files.  For example, the payroll manager doesn’t need to access health information.

Do employees have the right to see or copy their files?

The answer varies by state.  Some states do permit employees to see their files and make copies of documents in the files.

Do we have to document performance problems?

In general, employers can fire employees without documentation of previous performance problems.

However, it’s smarter to document warnings, corrective action plans, and other counseling and disciplinary actions in the employee file. 

Have employees sign disciplinary actions to acknowledge that they’re aware of them, regardless of whether they feel it’s justified.  If employees refuse to sign, include another manager as a witness to the conversation.  Have the witness document the discussion.  Should the employee file a complaint or a lawsuit, your documentation of his or her performance – both strengths and weaknesses – will be important in defending the company’s position.

It’s especially critical to document performance problems when a problem employee is in a legally protected class – for example, someone over 40.

Medical Economics points out that:

“Comprehensiveness counts. As April Boyer [an employment law specialist] puts it, "If an employee sues you, insufficient documentation isn't going to mean you'll lose, but it's certainly going to weaken your ability to prove your case."