Many people will dismiss recordkeeping as a less-than-important topic that can easily be discussed in a few minutes at the beginning of a relatively short staff meeting. No matter how prevalent this view, it is wrong. In fact, aside from responsibilities that businesses have to keep records about contractual and formation issues, businesses that employ others have significant and important statutory and regulatory responsibilities with respect to their records. Improper or faulty recordkeeping practices subject employers to enormous potential liabilities. On the other hand, good recordkeeping practices can reap significant benefits for an employer.
For instance, private-sector employers who regularly employ more than fifteen employees in a given year and public-sector employers have a statutory and regulatory obligation to preserve certain records related to their hiring and employment practices. 42 U.S.C. § 2000e-8(c); 29 C.F.R. §§ 1602.12, 1602.14, 1602.31. An employer’s failure to preserve those records can lead to legal sanctions in a lawsuit brought against the employer for discriminatory conduct, such as being required to paythe opposing party’s attorney fees. See Broccoli v. Echostar Communications Corp., 229 F.R.D. 506, 514 (D. Md. 2005) (awarding attorney fees for failure to preserve documents relevant to a wage claim and Title VII discrimination and retaliation claim). In other cases, litigants have been sanctioned millions of dollars for “spoliation of evidence” for destroying evidence in cases brought against them. See, e.g., In re Prudential Ins. Co., 169 F.R.D. 598, 617 (D. N.J. 1997) (imposing sanction of $1,000,000 for destruction of documents in a class-action claim against Prudential). Other potential sanctions against an employer who fails to preserve documents include (1) exclusion of relevant evidence, (2) an inference that the documents destroyed were harmful to the employer, (3) default judgment, or (4) contempt sanctions. See Fed. R. Civ. P. 37; Utah R. Civ. P. 37; EEOC v. Jacksonville Shipyards, Inc., 690 F. Supp. 995, 997-98 (M.D. Fla. 1988) (applying Rule 37 analysis in case where party failed to preserve records as required by EEOC regulations).
Aside from the prophylactic reason of avoiding sanctions in litigation, there are several reasons to keep good and accurate employee records. The first reason is related to litigation—records are often the best defense against claims brought by employees against employers. If an employer is careful to document a history of performance problems, for example, it may be able to easily overcome a wrongful termination claim brought by an employee.
Additionally, the law requires that employers keep certain records. Federal and state anti-discrimination laws require most employers to keep records of employee selection, promotion, demotion, reduction in force, and termination. Additionally, labor and immigration statutes require an employer to keep proof of an employee’s eligibility for employment in the United States. Further, federal and state statutes require the maintenance and preservation of records of employee tax withholdings, payroll payments, salary and wage information, and tip income.
Further, records help employers manage their employees and plan for the future. Accurate and careful records will show trends that an employer can use for strategic purposes.
For a more thorough discussion of these issues and a document retention schedule, please see the complete article: Best Practices for Employee Recordkeeping.Labels: Record Retention, Records