Company Records: What Should You Keep ... and for How Long
By Pat DiDomenico
Are you a dedicated dumper or habitual hoarder? When it comes to retaining company records, HR professionals often come in one of these two flavors. But the best strategy is to be neither. Instead, base your records retention policies on your own experience and your research of local, state and federal retention mandates.
Having a written record retention schedule allows your organization to ensure that it keeps the records it needs for legal, fiscal or historical reasons, and then destroys them when they're no longer useful.
Whatever your retention policy is, use it as a guide, not as an executioner. Retain records longer if litigation, a government investigation or an audit seems likely. In the event that legal action does occur, immediately stop all record disposal activities.
Here are five important points to remember when it comes to record retention:
- Don't be a "just in case" hoarder. Store records only for legal, operational or archival reasons.
- Retain and destroy documents systematically, according to a policy and a plan. Then document the when, why and how of your document disposal (those notes could come in handy in court).
- Don't retain unscheduled temporary materials, such as drafts, reminder notes, work sheets or extra copies.
- Don't hang onto documents just for their sentimental or public relations value. Information must earn its keep, like any other asset. A comprehensive record of the past that fosters a "company memory" can be an asset, but be sure to minimize your legal liability while doing so.
- Take note of state and local retention laws. The retention schedule below reflects standard business practices. You must also consider state and local statutes of limitations as well as regulations of government agencies that pertain to your industry or business. State retention statutes vary widely on tax, unemployment and workers' compensation records, as well as on environmental and other requirements. Check with your state and regional authorities for details. As an extra safeguard, have your CPA and your attorney review your records retention timetable before putting it into practice.
WHEN NO REQUIREMENTS EXIST ...
What can you do if a law does not state a specific retention period? This is not uncommon. There may not be a stated legal requirement for certain records, or the requirement may not include a specific retention period. You may have done a thorough search to locate certain records requirements but could not find any law addressing your particular documents.
Or you may have discovered that certain records must be maintained, but you could not determine for how long. Statutes and regulations often contain a phrase, "The following records shall be maintained . . . ," but they fail to tell you the retention period. Usually the phrase is interpreted as meaning "permanently" because there's no permission given for destruction of the records.
How do you deal with this quandary? Under the Uniform Preservation of Private Business Records Act (UPPBRA), whenever a law does not specify a retention period, businesses should keep their records for three years. If you destroy them sooner, you risk subjecting your organization to legal problems. However, only eight states have adopted this act or something equivalent. Courts could certainly require you to hold records long enough to permit the state to monitor compliance with its regulations--a "reasonable" period of time. Based on federal records and the UPPBRA, a three-year retention period should be
How long should you keep records if you cannot locate any legal requirements referring to them? Assuming your legal research was thorough, it is best to maintain the records for three years. You must, however, document your search effort and the assumptions you used to set the three-year period. Then, if you missed a legal requirement during your search, you have documentation to show the judge or regulatory agency that your organization had made a good-faith effort to comply with the law.
PERSONNEL RECORDS: SUGGESTED RETENTION PERIODS
KEY: "P" = Permanent. Otherwise, figures represent the number of years it's suggest that employers retain each document.
Accident reports, injury claims, settlements: 7 years
Applications, changes, terminations: 3 years
Attendance records: 4 years
Clock records: 4 years
Correspondence: 6 years
Daily time reports: 5 years
Disability & sick benefits records: 4 years
Earnings records: P
Employee contracts: 7 years
Employee service records: P
Fidelity bonds: 3 years
File, individual employee: 3 years
Garnishments: 7 years
Health & safety bulletins: 4 years
Injury frequency charts: 10 years
Insurance records: group, employee: 6 years