Businesses must keep employee records organized and accessible for specific periods to comply with federal law. These records include documentation related to payroll, hiring, benefits, and medical information. Retention is necessary for compliance, legal defense, and accurate tax reporting. The required duration varies significantly based on the document type and the governing statute, requiring a segmented approach to record management.
Basic Employment and Payroll Records
Wage and hour documentation is governed by the Fair Labor Standards Act (FLSA), which sets minimum federal retention periods for operational records. The FLSA requires basic payroll records, including employee identifying information, pay rates, and collective bargaining agreements, to be kept for at least three years. This three-year period applies to records detailing the basis for an employee’s wages.
Supporting documentation used for calculating wages, such as time cards, work schedules, and records of additions to or deductions from pay, must be retained for a minimum of two years. This distinction ensures the primary payroll ledger is preserved longer than the temporary records used to generate it.
Separately, the Internal Revenue Service (IRS) requires that all employment tax records be kept for at least four years after the date the tax was due or paid, whichever is later. IRS regulations cover documents like Forms W-2, W-4, and quarterly tax filings (Form 941). Employers must adhere to this four-year requirement for all records related to federal tax withholding and payments.
Hiring, Promotion, and Termination Documentation
Records related to employment decisions are subject to equal employment opportunity (EEO) laws, such as Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA). These statutes mandate a standard retention period of one year for most documents. This period begins from the date the record was created or the date the personnel action occurred.
The requirement applies to materials concerning hiring, promotion, demotion, transfer, or termination. This includes job applications, resumes, interview notes, and performance evaluations. Records for applicants who were not hired must also be retained for the full year.
If an employee is involuntarily terminated, their personnel records must be kept for a minimum of one year following the termination date. If a charge of discrimination is filed with the Equal Employment Opportunity Commission (EEOC) or a lawsuit is initiated, a legal hold immediately supersedes the standard one-year period. All relevant records must be preserved until the matter reaches its final disposition, including the conclusion of any related litigation or appeals.
Health, Safety, and Medical Documentation
Documentation concerning employee health and workplace safety often requires long retention periods due to the latency of occupational diseases. Records related to employee exposure to toxic substances or harmful physical agents are governed by the Occupational Safety and Health Administration (OSHA). These must be kept for the duration of employment plus 30 years.
This extended period applies to air sampling results, biological monitoring, and medical records related to workplace exposure. Medical records must be maintained with strict confidentiality and kept physically or digitally separate from the employee’s general personnel file. This separation is necessary to prevent unauthorized access to sensitive health information.
The Family and Medical Leave Act (FMLA) mandates that all records related to FMLA leave, including notices and documentation of benefits, be retained for at least three years. Records of occupational injuries and illnesses, such as the OSHA 300 Log and the annual summary, must be retained for five years following the end of the calendar year they cover. These logs track workplace safety incidents.
Employee Benefits and Pension Records
Records related to employee benefit plans, particularly retirement and pension plans, are primarily governed by the Employee Retirement Income Security Act (ERISA). ERISA requires plan administrators to retain all records used to file annual reports, such as Form 5500, for at least six years after the filing date. This six-year requirement applies to supporting documents like worksheets, receipts, bank statements, and contribution registers.
A more rigorous requirement applies to fundamental plan documents needed to calculate a participant’s benefit decades later. Records that determine an employee’s eligibility, vesting status, and final benefit calculation must often be kept indefinitely. This includes original plan documents, summary plan descriptions, deferral election forms, and records of account balances.
Permanent retention is necessary because the burden of proof rests with the employer to demonstrate that a benefit was correctly paid, even if a former employee inquires years after leaving the company. If the employer cannot produce the records, they may be legally required to pay the benefit again.
Best Practices for Record Management and Destruction
An effective system for managing employee records begins with a formal, written retention policy that defines the timeline for every record type. This policy should be regularly reviewed and communicated to all personnel involved in record maintenance. Secure storage is necessary for both physical and digital records, ensuring access is limited to authorized personnel.
When the defined retention period expires, the document must be securely and permanently destroyed. For physical documents, this means shredding; for electronic records, it requires secure digital deletion to prevent recovery.
The destruction process should be documented, noting the date, the records destroyed, and the method used, to provide proof of compliance. If the organization anticipates litigation, a “litigation hold” must be issued immediately, suspending all routine destruction for relevant records regardless of their standard schedule.
The Importance of State and Local Laws
Federal statutes establish the minimum baseline for how long employee records must be kept. However, many state and local jurisdictions require significantly longer retention periods for certain types of records, such as personnel files or payroll documentation.
Employers must always comply with the longest applicable retention period, whether set by federal, state, or local law. If a state requires a five-year period for a specific record and federal law requires three years, the five-year period must be followed. Organizations with employees in multiple locations should consult local counsel to ensure compliance with the most stringent jurisdictional requirements.