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More Than Paperwork: Why Small Businesses Need to Create, Organize, and Keep Accurate and Complete Employee Records
Picture this: A small business faces a discrimination claim after terminating an employee for performance issues. The company knows the allegations are unfounded and sets out to prove its decision was justified for legitimate business reasons. But while there are recollections of verbal conversations with the employee, the company had few written records to support its explanation for the employee’s termination. Without performance evaluations, warnings, write-ups, or documentation of the termination decision, defending the claim became more difficult.
The way to avoid this scenario is simple: supervisors should create accurate records regarding their employees throughout their tenure. Management should promptly document significant performance concerns, disciplinary warnings, employee complaints, and the reasons for employment decisions. Clear, factual records preserve details and help explain the company’s actions if those decisions are later challenged.
Once these records are created, a well-built records inventory helps an employer respond quickly, consistently, and defensibly when its employment decisions are questioned. For small businesses, record-keeping doesn’t have to be elaborate – it needs only to be accurate and reliable. Below is a list of categories as a starting point for the records most employers should accumulate.
Start with Seven Core Categories
- Hiring: Applications, résumés, interview notes, background check documentation, and hiring decisions.
- Form I-9’s: Employment eligibility forms and supporting documents.
- Payroll: Pay rates, wage statements, hours worked, overtime, deductions, and tax-related payroll documentation. Records of hours and overtime worked are particularly important for non-exempt employees but can be useful for some exempt workers as well.
- Evaluation and Discipline: Performance reviews, attendance records, coaching notes, warnings, and disciplinary actions taken.
- Investigations: Complaints, witness statements, interview notes, evidence, findings, and records of any corrective action.
- Leave and Accommodation: Leave and accommodation requests and related correspondence and meeting notes, with medical information kept separate from personnel files to protect confidentiality.
- Separation records: Resignation notices, termination documentation, final-pay records, severance agreements, and unemployment-related documents.
Keep the Inventory Simple
For each category above, keep track of the storage location, access restrictions, and the retention period for each document. Assign one person to maintain the inventory, even if your business has no dedicated HR department. Make sure to review retention periods among the categories of documents with counsel, as requirements vary by record type, applicable law, and circumstances.
Document Now, and Preserve When Needed
Make sure to train your supervisors to document performance concerns and employment decisions when they occur, not after a decision dispute arises. Keep records factual, consistent, and accessible in designated locations.
While it is important to follow a regular retention schedule, you should suspend routine deletions of documents when a claim, charge, audit, or lawsuit requires preservation. A small business does not need a complicated system; it needs a reliable one that preserves the records supporting its decisions.
For small businesses, effective recordkeeping starts with creating the right documents, organizing them consistently, and retaining them for the appropriate period. If you have questions about developing a practical recordkeeping process tailored to your needs that supports your employment decisions and protects your business, please feel free to reach out.
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