Since virtually all employment disputes relate in some way to what documents are kept in an employee’s personnel file, it is crucial that employers properly maintain employee personnel files. Of course, few employers enjoy dealing with paperwork, but taking the time to properly create and maintain personnel files will pay off in the long run. Properly maintained personnel files allow the company to have all important documents relating to each employee in one central location that is easily accessible when it is time to make a personnel decision or to comply with government audits, which are increasingly becoming more prevalent. Moreover, if you have to terminate a problem employee, maintaining the appropriate documentation in the personnel file will protect you from any frivolous claims brought by a terminated employee.
This section serves to identify what should and should not be kept in a personnel file, as well as how to properly maintain a personnel file in today’s litigious environment.
(Documents to Keep in a Personnel File)
A personnel file should be opened for each employee on their date of hire.
Under Illinois and federal law, all job-related documents should go into the file, including (1) a job description for the position, (2) any job application and/or resume, (3) any written offers of employment, (4) the employee’s IRS Form W-4, (5) any receipts or signed acknowledgements (FMLA policy, sexual harassment policy, computer use policy, etc.) of company documents, policies, or training, (6) all performance evaluations, (7) any forms relating to employee benefits (or waiver of employee benefits), (8) forms providing next of kin and emergency contact information, (9) awards or citations for good performance, (10) warnings and/or other disciplinary action notices taken due to the employee’s poor performance, (11) notes and memos on the employee’s attendance or tardiness, (12) any contract or written agreement between the company and the employee, if applicable (employment agreement, non-disclosure agreement, etc.), (13) any complaints from customers and/or coworkers of the employee, and (14) all documents related to the worker’s termination or departure from the company (such as exit interview information or documentation related to the employee’s termination). In Illinois, for example, an employer can be barred from affirmatively using a document justifying an employee’s termination in subsequent litigation if the employee requests the personnel file and the relevant document is absent. Thus, it is imperative that employers properly maintain their personnel files and ensure that they contain the appropriate information and documentation. In short, all documents that relate to the employee’s qualifications for employment, demotion, transfer, additional compensation, discharge or other disciplinary actions should be included and maintained in an employee’s personnel file.
(Documents That Should Not Be Kept in a Personnel File)
A company’s personnel files should not be a receptacle for every single document, note, or thought about an employee. For example, some documents should be segregated from a personnel file so that they may be easily obtained in the event of an audit or subpoena. In this regard, all Employee Eligibility Verification Form I-9s should be segregated from an employee file. The Form I-9 is a form from the United States Citizenship and Immigration Services (formally the INS) that must be completed by the employee and employer verifying that the company has checked to ensure that the employee is legally authorized to work in the United States. Since the government is entitled to inspect these forms with very little notice, a company should segregate all
employee Form I-9s into a separate file so that, if audited, it will make it much easier for the company to promptly provide the government with those forms.
Second, medical records of an employee should also not be placed into a personnel file. In many states, workers have certain rights to privacy to their medical information. Therefore, keep all medical records, including records related to workers’ compensation claims or an underlying injury, in a separate file apart from the personnel file.
Third, since the contents of a personnel file may turn into evidence in a lawsuit brought by a disgruntled former employee, it is important not to maintain lawsuit evidence, attorney work product or attorney-client communications in a personnel file. Entries that do not directly relate to an employee’s job performance and qualifications, should not be kept in personnel files since they are not related to the employee’s job performance and, if produced, could inadvertently waive a privilege or disclose information that is otherwise not discoverable. A good rule of thumb in this regard is not to put anything in the personnel file that you would not want a jury to see.
(Procedures to Help Maintain a Personnel File Over Time)
Reviewing personnel files periodically is useful to ensure that important documents are up to date. Therefore, at least once a year, companies should check their personnel files to confirm that they include: (1) a signed original copy of every contract or agreement between the company and the employee, (2) copies of the employee’s current job description and all job descriptions since the employee’s date of hire, (3) copies of all performance evaluations, (4) documentation of all salary adjustments or payroll changes since the employee’s hire, (5) documentation relating to any awards or disciplinary issues relating to the employee, and (6) signed acknowledgement forms for the most current version of any employee handbook or policies.
One final issue of key importance in maintaining a personnel file is how long to maintain it. Under new federal e-discovery rules, draconian penalties can result if a company permits the destruction or deletion of relevant documents -- such as those documents contained in a personnel file -- after a company has notice of a potential claim. To avoid such a possibility, it is generally advisable to keep a personnel file for a minimum of three (3) years following the relevant employee’s termination and/or separation from the company. If the company reasonably anticipates litigation, either by receipt of a formal charge or by a
verbal threat by an employee, all potentially relevant documentation relating to their employment should be preserved, even if the company maintains a document destruction policy. When in doubt, the safest practice is for the company to preserve the relevant documentation, including those documents contained in an employee’s personnel file. As well, keep in mind that many states, such as Illinois, allow employees (both current and terminated) to access their personnel file. For this reason also, it is important for companies to properly maintain and preserve their employee files.
CHAPTER IV
EMPLOYEE HANDBOOK
One of the initial issues facing a company is whether to publish an employee handbook. The purpose of an employee handbook is to provide a company’s employees with the policies and inform them of the rules that govern them throughout the stages of their employment. Through an employee handbook, employers notify employees about the legal rights and obligations they both have in the employment relationship. While an employee must comply with the policies contained in an employee handbook, a handbook should not be drafted in a way so as to create an employment contract with the employee. In other words, the employee handbook, while specifically describing the rights and duties of the employee, should be drafted in a way so as to maintain the
“at will” relationship between the employer and the employee.