May 29, 2018

Things That Keep Your Employment Lawyer Up at Night: Record Retention

,

Under a number of California and federal laws, employers are legally required to maintain certain employment-related records for a fixed period of time.  Changes in the past few years have altered many of the record retention guidelines employers may be familiar with, opening employers up to the risk for civil penalties and large awards of back pay.

Why it matters:

There are many common, real-life situations that employers face where records retention can be especially important.  First and foremost, good record retention leads to good defenses.  When litigation eventually crops up – an employee claiming wrongful termination, or making a claim for missed meal breaks – employers must have their own side of the story.  The best way to back that up is with good documentation.  If employers are not keeping the right records, getting accurate records in the first place, or when records are lost or prematurely destroyed, their best defense can be compromised and lead to allegations of a “cover up.”  Missing or inconsistent documents may cause employers an unnecessarily uphill battle if an employee challenges their reasons in court.

Being prepared for litigation is particularly salient given the California Supreme Court’s recent decision in Dynamex Operations West, Inc., which modified the test for determining whether a worker is an independent contractor or employee in California.  An employer who loses a challenge to the worker’s classification as a contractor will be responsible for producing time and wage records required for employees by federal and California law.  Employers without such documentation could face large penalties and back wage awards.

Government investigations, including immigration raids, are another area of risk.  In the current political climate, California employers are arguably more likely to be targeted for such raids than employers in other states, and many California businesses have already been subject to enhanced ICE scrutiny.  Finally, new California laws such as the Paid Sick Leave law and Los Angeles and San Francisco’s “Ban the Box” laws also carry their own, not widely known record retention requirements.

Keep Calm and Document On:

But the single most important reason to keep such records is that under the law, employers have to.  For how long?  Generally speaking, for at least four years after the end of employment.  This includes payroll, wage and personnel records, applications and hiring documents, requests for family leave and/or sick time, as well as time and attendance records.  Some notable exceptions – with potentially longer retention requirements –  include income tax records (6 years), workers’ compensation-related documents (5 years from later of date of injury or last benefit payment, and 2 years from date of closure), and CAL-OSHA records (length of employment plus 30 years).

 

The table below lists the retention minimums under the most common federal laws:

Fair Labor Standards Act (FLSA) Application and hiring, payroll, time and attendance, wages, schedules, collective bargaining or other employment agreements 3 Years
Family Medical Leave Act (FMLA) Requests for and documents related to FMLA leave and eligibility 3 Years
Title VII of the Civil Rights Act of 1964 (Title VII) Hiring and personnel-action records 1 Year
Americans with Disabilities Act (ADA) Hiring and personnel-action records 1 Year
Age discrimination in Employment Act (ADEA) Hiring and personnel-action records 1 Year
Immigration reform and Control Act I-9 and related documentation 3 years from hire or 1 year from termination

 

Finally, employers should note that the Lily Ledbetter Fair Pay Act (FPA) allows disparate pay claims under the Equal Pay Act on any basis protected by Title VII, the ADEA, the ADA, the Genetic Information Nondiscrimination Act, and the Rehabilitation Act.  Further, the FPA essentially eliminates the statute of limitation for disparate pay claims, because it resets the clock for employees to file a new disparate pay claim every time the employee receives a paycheck.  However, back wages are only available for two years.  Consequently, we recommend that employers keep documents necessary to defend a federal disparate pay claim for at least two years after employment ends.

Stefanie Renaud