When To Dispose of Terminated Employees’ Data

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When employee relationships come to an end, there is a lot of temptation to dispose of their personnel files. However, you still have a legal obligation to keep and secure terminated employees’ records. 

Recordkeeping is a vital part of HR's responsibilities. As the employer, it is your responsibility to continue to protect your former employee's sensitive information, regardless of the circumstances of the separation, and keep records accessible. Regulations also mandate retention schedules for different categories of documents. This includes separation records, which need to be maintained in the employee's personnel file.

So, let's go further into how HR should retain data from terminated employees, starting with explaining what termination means from an HR perspective.

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What is Termination?

To a layman, if an employee is terminated, they are fired. However, the HR definition is somewhat broader. Termination is used to refer to any employee separation, including both voluntary and involuntary departures and retirement. So, termination does not, and should not, imply any adversarial relationship between you and your former employee.

In many cases, this means your employee will be coming back to you for references in the future; storing records helps with this.

Items To Keep in Personnel Files

Each employee has a personnel file that helps you keep their records together. These days, these files are generally electronic, but they may also be physical. Long-term employees may have both a physical and an electronic file.

You should keep the following in the personnel file:

  • Initial application and resume
  • Original offer letter
  • Acknowledgment of the employee handbook and policies
  • Emergency notification forms
  • Records related to job performance, transfers, and promotions
  • Compensation history
  • Performance appraisals and awards
  • Warnings and notes of discipline
  • Attendance records
  • Training attendance and completion
  • Any specific agreements, such as NDAs
  • Exit interview records
  • Separation checklists
  • Resignation letters
  • Unemployment documents
  • Any separation agreements
  • All correspondence and notes related to separation

As you can see, all records associated with the termination should also be kept in the personnel file. If there is any chance of an employee returning in the future, files should be kept to make everyone's life easier. Additionally, former employees may have the right to access their personnel files and potentially copy items from them.

Some records need to be kept separately. Medical records governed by HIPAA must be kept separate from the personnel file to limit access to them. The same goes for financial data, which includes payroll data, and is covered by FCRA. Immigration records should also be separated.

In addition to the potential convenience of needing the data in the future, there are recordkeeping requirements under the FLSA.

FLSA Recordkeeping Requirements For Non-Exempt Employees

To ensure that non-exempt employees get overtime as required, the FLSA has some pretty solid recordkeeping requirements, including recording their hours, the basis of pay, and their overtime. There are rules on how long records should be kept. These include:

  • Three years for payroll records, collective bargaining agreements, and sales and purchase records. This includes the payroll records of terminated employees
  • Three years for personal information about the employee
  • Two years for records on which wage computations are based

To keep things straightforward, the easiest way is to keep all terminated employees' personnel files for three years. In some cases, you might want to keep a file or part of a file for longer. HR should set concrete record retention guidelines to ensure everyone is on the same page, and files are not prematurely disposed.

EEOC Recordkeeping Requirements

The Equal Employment Opportunity Commission also has record retention requirements. Specifically, they require that all personnel records are kept for one year for employers covered by federal anti-discrimination laws. If an employee is involuntarily terminated, then their records must be retained for one year from that date.

These requirements are lower than FLSA but apply to all employees regardless of exempt or non-exempt status. If you have an EEOC charge filed against you, all records relating to the issues under investigation have to be retained until the case is fully resolved.

You should keep records for the longest time required under these laws, as a minimum. It's also possible that there are retention requirements under state law that you need to worry about.

However, you should also not keep employee files forever. In pre-digital days it was a matter of space. Now, it is a matter of security; cyber thieves can't steal data you are not retaining, which reduces your liability to former employees in the event of a breach.

It's vital to retain and delete employee information properly. Thus, it's better to keep these records in a secure HRIS system to save space and improve security. Record retention can be a complicated matter. Working with a PEO can help you follow record retention guidelines and provide you with the IT support needed to run a sound HRIS system and keep your employee records secure. Check out our blog for more information.

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